By Victor Beck, CFA
You trust your financial advisor to help you build the future you envision. Your investments are stepping stones toward that future, and the management can make all the difference. Does it matter if your financial advisory firm outsources your investments or practices in-house management?
The answer is yes. “In-house management” means that the firm’s employees manage clients’ investments themselves. Firms that outsource hire external third parties to handle client portfolios.
Both approaches can work, but we believe in-house management can have distinctive advantages which every investor should know. Here’s a closer look.
You Get More Value for Your Advising Fee
If your financial advisor outsources investment management, you might be paying more than you have to. Third-party investment managers charge their own fees, and more often than not, that fee is passed down to you.
Because you’re paying your advisor and the third-party investment manager, you’re effectively paying double for the same service. Over time, that adds up, cutting into your investment returns. With an in-house management firm, your advisory fee covers investment management too.
Improved Communication Between Your Advisor and the Investment Team
When it comes to investing, clear communication is vital. The process often goes something like this:
- You discuss your goals with your financial advisor.
- Your financial advisor formulates a plan and communicates with the investment team.
- The investment team takes action to execute the plan.
Any breakdown in this process could compromise your portfolio and hinder your long-term goals. When your financial advisor works with the investment team on a daily basis, they can effectively convey your goals to investors. Working under the same roof also makes it easier to continually monitor your investments and verify they’re in alignment with your goals.
Because they work alongside the portfolio management team, your advisor is likely more in tune with your portfolio’s performance and current changes.
We feel this approach typically leads to a well-rounded, balanced portfolio. It also boosts efficiency while helping to reduce the risk of costly miscommunications.
You Have Access to the Investment Team
Investing isn’t just about transactions. It’s also a deeply personal experience, and in some cases, you may see improved returns when you can connect with the ones making your investment decisions.
If your advisory firm outsources investment management, you may never even have a conversation with the people directly overseeing your portfolio.
In-house management allows for authentic connection and understanding. You can connect with the people overseeing your portfolio and have a discussion about what you’re invested in and why.
It May Reduce Potential Conflicts of Interest
While this is not always the case, firms that outsource investment management sometimes create conflicts of interest. For example, if your advisor is incentivized by commissions from the third-party manager, they might not prioritize your financial needs.
A fiduciary firm like Beck Capital Management has a legal and ethical obligation to put your interests first. When that firm includes in-house management, its fiduciary duty extends to your investments as well.
Discover the In-House Management Difference
At Beck Capital Management LLC, we believe that in-house management is a vital part of delivering the results our clients deserve. Our philosophy of active investment management means we don’t just wait for returns to materialize. We chase them instead.
Our in-house management efforts are guided by state-of-the-art tools, including multiple institutional-grade databases. In our experience, these tools aren’t typically found at independent financial advisory firms, and we believe they give us a meaningful edge.
If you have questions or want to learn more about our approach to investment management, contact us today. To schedule a meeting, call (512) 345-6789 or email information@beckcapitalmanagement.com.
Frequently Asked Questions
Q: What is in-house management, and why does it matter for investors?
A: In-house management is a service model where a financial firm’s internal team directly executes trades, selects securities, and monitors portfolios rather than delegating these tasks to external third-party managers. This matters because it provides a shorter “feedback loop” between your financial goals and the actual market moves made in your accounts. By eliminating middlemen, the firm maintains total accountability for performance and risk management. This streamlined, hands-on approach to portfolio construction is a foundational principle at Beck Capital Management in Austin.
Q: How can in-house management save investors money?
A: In-house management typically reduces the “Total Expense Ratio” of a portfolio by eliminating the secondary layer of management fees charged by outside firms. When an advisor outsources, the client often pays two separate entities: the advisor for the plan and the third-party manager for the investment execution. By integrating these functions, investors can avoid paying double for the same service, allowing more of their capital to remain invested and compound over time. This commitment to cost-transparent wealth management is central to the client experience at Beck Capital Management in Austin.
Q: What advantages does in-house management offer in terms of communication and access?
A: The primary advantages are transparency and direct access to the decision-makers. In an outsourced model, a client may never speak to the person actually clicking “buy” or “sell” on their stocks. In-house management removes these barriers, allowing for:
- Real-Time Monitoring: Advisors and portfolio managers sit in the same office, ensuring daily alignment with client objectives.
- Direct Accountability: Clients can ask specific questions about individual holdings and receive answers directly from the team managing the assets.
- Reduced Miscommunication: There is no “lost in translation” effect between an advisor’s strategy and an outside manager’s execution.
This high-touch environment fosters a more authentic connection between the investor and their capital, a hallmark of the service at Beck Capital Management in Austin.
About Victor
Victor Beck currently serves as Beck Capital Management’s Vice President of Investment Research, seeking outsized returns for clients by conducting robust fundamental analysis on equity and fixed-income assets. Victor is a CFA® charterholder.
Victor graduated summa cum laude from Southern Methodist University in 2017 with Bachelor of Science degrees in Economics and Management Science, along with a minor in Mathematics. In 2021, Victor graduated from Rice University’s MBA program, concentrating in Finance and Real Estate. During his time at Rice, Victor served as an equity analyst and later as Chief Economist for the program’s student-led investment fund, the M.A. Wright Fund.
Prior to his time at Beck Capital Management, Victor most recently served as a Banker and Advisor for J.P. Morgan’s Private Bank in Dallas, TX. Before his MBA career, he worked in a data analytics role for Ernst & Young’s Forensics unit.
Victor lives in Austin and is a fan of college sports, physical fitness, live music, and global travel.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
Any investments or strategies referenced herein do not take into account the investment objectives, financial situation, or particular needs of any specific person. Product suitability must be independently determined for each individual investor.
Neither asset allocation nor diversification guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.
Beck Capital Management does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.