Other choices for cash management.

• Author: Kennedy, Christopher
• Position: Letters to the editor - Letter to the Editor

"Choosing the Best Compensation Plan" (October issue), discusses the merits of fee and non-fee cash investment managers. It is appropriate to highlight the importance of this decision, particularly in these days of increased regulatory oversight and executive accountability. Too often, the selection of a cash manager is a default decision--with the company choosing the financial institution that houses their credit facility or the brokerage firm offering investment-banking services. The choice of a cash manager should be a strategic business decision and given proper fiduciary consideration, independent of bundled service arrangements.

I applaud the article for addressing this subject, but see some points of clarification. First, framing the discussion as "Fee, or non-fee?" over-simplifies the real issue. If given this choice, who would want to pay a fee? The real question is whether to hire a broker or a registered investment advisor (RIA), and that question requires one to ad-dress fiduciary responsibility, investment expertise and alignment of interests. One must weigh the motivation of brokers to sell securities verses the RIA's directive to act in a more consultative portfolio management role.

Second, there should not be a general assertion that non-fee managers are "designed primarily for companies pursuing a buy-and-hold strategy." Again, the...