Yahoo Finance What questions should I ask potential investment managers?
Q What sort of questions should I, as chairman of our community foundation, be asking in interviews with potential investment managers, who will be tasked with looking after the funds on behalf of the charity?
A To pick the best candidates for your Beauty Parade, contact other charities to obtain some suggestions. There's no better recommendation than one that comes from a satisfied customer.
There are funds that specialise in investing charitable money and take account of ethical investment needs.
Base your decision on the world that you understand; you’re not an investment guru, but you’re probably a good judge of people with plenty of common sense. There may be an enthusiastic follower of the stock market on your committee who’s happy to take the lead, but few of the important questions are directly linked to investments.
Your candidates will almost certainly come with a bound folder for each member of your committee that proudly advertises past performance, present expertise and the research used to secure future success.
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You might be impressed by the way they promise to use algorithms to “take advantage of strategies that give significant scope for growth and combine active and passive management techniques.”
Whatever the method, remember that they’re simply investing your money in stocks, shares and fixed interest securities.
It’s important to work out how much of the money you give them doesn't actually get invested. What are their costs? Do they take commission or do they invest in a fund that itself takes a percentage of your money? Your chosen investor is in it for profit, so try to work out how they’re going to make money out of your business. If they brag about a great research department, bear in mind that they have to make money, out of you, to pay for it.
Also, ask about their track record; you don't want to go with a consistently poor performer. However, be warned: the performance of a superstar may weaken the very moment that you climb on board.
It’s important to trust the person who’s looking after your money, but you may well just be meeting a sales executive, so ask to talk to the person who will be investing the funds on your behalf. Although they can be blamed if it all goes wrong, the community foundation will consider you responsible.
There are plenty of things to think about, but in the end, go with your gut instinct. You can only do your best.
Q My daughter set up a mobile dog grooming business two years ago and now has far more business than she can handle. She’s wondering how best to expand and is considering purchasing a second van, employing someone to work it.
But she’s worried that they may end up as a rival once they get to know the area and clientele.
What's your recommendation?
A Can I suggest that your daughter has a serious think about what she would like to be doing five and 10 years from now?
Does she still want to be grooming dogs; would she like to be running a growing business; or would she like to move on, leaving the business and the dog grooming behind as she gets on with the rest of her life?
If she prefers dog grooming to being an entrepreneur, why not put prospective customers on a waiting list, increase the prices a bit, and continue to enjoy what she does best while making more money.
If, on the other hand, your daughter wants to build a bigger business, she will have to put other dog groomers out on the road and take
the risk that some might turn into competitors and poach a few customers.
In my view, the risk is well worth taking; not many people have the ambition to set up on their own – and hardly any will be good enough to compete with your daughter.
She could put a restrictive covenant in the employee’s contract,
but in my experience, that has a limited effect. Another thought is to develop the business as a franchise, so that new dog groomers are investing in their own business, while giving your daughter a signing-on fee and a percentage of turnover.
I don't think she should be too worried about new recruits setting up in opposition. The key question is whether your daughter wants to
groom dogs or develop a business.
John Timpson is chairman of the high-street services provider, Timpson. Send him an email at askjohn@telegraph.co.uk
