Former Anfield hero McManaman suggested anyone who thought the likes of Pep Guardiola or Jose Mourinho would be interested in replacing the sacked Kenny Dalglish was not "living in the real world".
Liverpool's owners, Fenway Sports Group, have been criticised for a recruitment process that has already seen them snubbed by Swansea boss Brendan Rodgers, amid reports they would attempt to interview up to 12 candidates.
The Reds have been given permission to speak to Wigan's Roberto Martinez, while it has been suggested they also want to meet former Chelsea manager Andre Villas-Boas and are even considering reappointing Rafael Benitez, both of whom are currently out of work.
An attempt to canvass fan opinion on the subject backfired when Liverpool were prompted to delete a Twitter message on their official account asking who should replace Dalglish.
Some supporters believe Liverpool's status as one of the most successful clubs in European football history should allow them to go out and get almost anyone they want.
But McManaman, who spent more than a decade at Anfield, told Press Association Sport: "That's not the case any more.
"You can't identify Pep Guardiola and go and get him, you can't identify Jose Mourinho and go and get him.
"Those days of that type of appointment have long gone.
"It's unrealistic, isn't it?
"Of course, we'd like Pep or we'd like Jose Mourinho - but we're living in the real world.
"I don't know who's available, who's willing to come.
"The finance is a big thing, whether you're going to have to extricate someone from a contract.
"It's not like it was 20 years ago."
McManaman refused to criticise FSG's approach to finding a new manager and defended their attempts to interview Rodgers and Martinez, among others.
"I know they're speaking to a number of managers, aren't they, and trying to bring in the right appointment," he said.
"I presume that's all you can do.
"They also spoken to a lot of high-calibre managers. It's just that we don't know about them.
"People are picking on Roberto Martinez and Brendan Rodgers.
"They're both wonderful managers and Roberto Martinez is a superstar - he's a friend of mine."
Dalglish lost his job on Wednesday following Liverpool's worst Barclays Premier League finish - eighth place - for 18 years and their lowest points tally - 52 - since 1954.
They did win the Carling Cup and finish runners-up in the FA Cup but FSG expected the funds Dalglish was given to spend to guarantee a more sustained push for a Champions League place.
McManaman warned that whoever succeeded the Scot would need an even bigger transfer kitty to haul Liverpool back into contention for a top-four finish next season.
"I don't know how much financial muscle they've got," he said.
"If they go and spend £500million, it is realistic. If they go and spend £10, it's unrealistic."
McManaman was brought to Liverpool by Dalglish during the latter's first spell in charge and revealed he was with some of the current players when news of Wednesday's sacking emerged.
"I haven't heard from Kenny," he said.
"But I was with a lot of the other players the other day and it was a shock."