Building a Strong Investor-Manager Relationship

Quarterly letters to investors are another great device for self-examination and communication. Both managers and clients can use that communication process to their advantage.

I find that the best-informed customer will do his or her due diligence on a potential manager. There should be an interview process between the investor and manager. Certainly the investor must carefully assess the potential manager, but I take this process one step further and interview the client as well. If I feel that the potential client does not have clear investment objectives, does not understand his or her risk tolerance or is not easy to work with, I may not accept that person's capital to manage.

Finally, all investors should ask for and obtain a few names of the manager's existing clients whom they can call as referrals. Use those conversations to confirm the assertions of the potential manager, confirm past performance and ascertain client satisfaction.

-- Written by Scott Rothbort in Millburn, N.J.

>To order reprints of this article, click here: Reprints