Proprietary Portfolio Managers
Examples of Conflicts of Interest
- Manager directs trades to a firm to access research and client reporting services (soft dollar benefits)
- Manager charges a full active management fee when most of the portfolio is indexed.
Questions Wealth Owners Should Ask to Surface Conflicts
- How do you determine which brokerage firms execute trades for stocks and fixed income securities?
- What percentage of your trading is done with each of the five firms that execute the largest volume of your trades for stocks and fixed income securities?
- If your firm is able to recover portions of bid-ask spreads or commissions paid on trades executed on behalf of your clients, or commissions paid on products or services that are purchased on behalf of your clients, please describe how such recoveries operate, how they are reported to clients, and how they impact fees and charges clients pay your firm.
- Do you conduct research in house or do you buy research from other
- firms? If you buy from other firms, how do you pay for that research and,
- if payment is in soft dollars, how much is it costing me as your client?
- How much of your portfolio is actively managed and how much is passively managed? Will fees reflect these facts?