Financial Planning Vs Investment Management


Portfolio Manager Vs Financial Advisor

The Difference Between Wealth Management and Asset Management

A professional who assists in financial planning is referred to as Financial Advisor or Wealth Manager. The one who provides the services of portfolio management is known as Portfolio Manager.

Portfolio Manager and Financial Advisor are often deemed as one but in fact both of them are distinct professionals and do not perform the same function. Portfolio managers are responsible for creating and maintain an investment account, while financial advisors sell a specific product or service.

Qualifications And Educational Requirements

A consultant holding the CFP designation must have at least a bachelor degree from an accredited college or university and 6,000 hours of financial planning experience. He or she must also complete the CFP educational program and pass the final examination. The examination may be waived if the consultant has a Ph.D in business or economics, or is a CPA, CLU, CFA, or an attorney.

Learn Which Financial Advisors Have Your Back

Financial advisors go by many names: investment advisors, brokers, certified financial planners, financial coaches, portfolio managers. There are even financial therapists. So who does what and who can you trust?

Since some of the most common titles advisors use, including the term “financial advisor” itself, aren’t tied to any specific credentials, dont assume that someone who uses an official-sounding title has any specific training or credentials. Anyone who gives investment advice must be registered as an investment advisor with either the U.S. Securities and Exchange Commission or the state, depending on their assets under management.

Some financial advisors have a fiduciary duty to their clients, meaning they are obligated to act in their clients best interest rather than their own. Always work with a licensed, registered fiduciary preferably one who is fee-only, which means the advisor is paid directly by you and not through commissions for selling certain investment or insurance products. Certified financial planners have a fiduciary duty to their clients as part of their certification.

No matter what title, designation, certification or license an advisor claims to have, its on you to vet the advisors credentials and experience. Always research an advisors background by looking up the firm’s Form ADV before you agree to work with them. You can also review an advisor’s employment record on FINRA’s BrokerCheck website.

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Suitability Standard Versus Fiduciary Duty

There is a significant difference between the two legal standards that apply to financial advice:

  • Suitability. Stockbrokers, registered representatives, and other investment professionals are required to make investment recommendations to their clients based upon age, risk tolerance, and financial circumstances. For example, a recommendation to trade high-risk commodities would generally be unsuitable for a 70-year-old widow whose investment income was her sole support. At the same time, the same recommendation to a 30-year-old executive in the prime of his earning years might be suitable, though ill-advised. Advisors do not have a legal or regulated requirement to educate their clients about the nuances of investing, nor about the presence of alternative investments. Unfortunately, such a broad standard often results in the products that pay the highest commissions and fees being recommended.
  • Fiduciary Duty. Registered investment advisors are held to a much higher standard for their recommendations than other advisors. RIAs are required by law to put their clients interest above their own. Any investment advice must be thorough and complete, and all potential conflicts must be disclosed to the client. Though CFPs arent legally required to act as fiduciaries to their clients, their professional standards require that they do.

A Financial Plan Can Jumpstart Savings Even With A Small Amount Of Money

Wealth Management v/s Financial Planning

The most common reason cited for not having a plan is “I don’t have enough money.” This is a misconception. Planning, even in small steps, doesn’t take large sums of money to start.

In fact, financial planning can have a profound impact on lower-income households by helping people improve their saving and budgeting habits. A written plan helps savers prioritize their goals and, as mentioned earlier, provides a way to gauge success.

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Everyone Needs Comprehensive Financial Planning

Even if you are in debt or have no savings, you will benefit from financial planning.

Alternatively, if you dont have any money available for investing, there is no sense in paying for the services of an investment management specialist. Meet with a professional for comprehensive financial planning and this professional will help develop a roadmap to financial success, setting the stage for you to tap into the expertise of an investment guru.

Even if you are just starting out in life, deep in debt, or suffered a significant financial setback that leaves you without money for investing, you will greatly benefit from comprehensive financial planning. Our CERTIFIED FINANCIAL PLANNER Professionals perform deep dives into clients finances, making decisions based on a detailed modeling of each individuals distinguishing financial situation.

We provide active investment management yet we also provide additional components of financial planning for those who arent yet ready to invest or simply lack the savings necessary to invest. Meet with an investment advisor on our team and we will develop a financial plan for success that is uniquely yours.

Online Financial Planning Services And Advisors

This is the next step up from a robo-advisor: an online financial planning service that offers virtual access to human financial advisors.

A basic online service might offer the same automated investment management you’d get from a robo-advisor, plus the ability to consult with a team of financial advisors when you have questions. More comprehensive services such as Facet Weath and Personal Capital roughly mirror traditional financial planners: You’ll be matched with a dedicated human financial advisor who will manage your investments and work with you to create a holistic financial plan. Many online financial advisors can match you with an advisor with a top-tier credential such as a certified financial planner.

  • Medium cost: Online financial planning services will typically cost less than a traditional financial advisor but more than a robo-advisor. Some services have relatively high investment requirements of $25,000 or more others require no minimum investment.

  • Good when: You’re comfortable meeting with an advisor online but would still like holistic financial planning services such as estate planning, retirement planning or help with company stock options. Online advisor marketplaces such as Harness Wealth and Zoe Financial, and many online advisors themselves, do the work of vetting a financial advisor for you.

  • Look elsewhere if: You’d prefer to work with an advisor in person.

» Ready to compare? Read our full roundup of the best financial advisors

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How Are You Paid

Fee structures often lack transparency. Don’t be afraid to put your potential advisors under the microscope until you feel comfortable with how they’re being paid.

To get to the heart of the matter, ask direct questions: Do you or a related company receive any payments from money managers you recommend, consider, or otherwise mention? If so, what is the extent of these payments in relation to your other revenue?

Is There Anything Included In Portfolio Management That Is Not Part Of Financial Planning

Smart Money- Investment Planning Vs Financial Planning

Generally, the answer is no. Full-scale financial planning includes portfolio management along with much more. The ability to analyze tax aspects of your investments alongside retirement needs, such as income and how to structure your investments for after tax retirement income, is extremely important. Without the big picture view of someones financial situation, it is nearly impossible to construct.

Comprehensive financial planners see numerous opportunities to add value beyond sheer investment rate of return such as:

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  • Long-term income tax planning
  • Analyzing required rate of return on your investment portfolio in order to achieve your retirement goals, and
  • Identifying risks and opportunities in the greater financial world.

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Whats The Difference And Which Do You Need To Succeed

There are many things in our world that go together. For example: Exams and Stress. Good Times and Friends. Puppies and Happiness. While Investment Advice and Financial Planning complement each other well, they have differences that are often misunderstood and may cause confusion. Investment advice is a targeted and specific form of guidance such as investment allocation or an insurance review. A financial plan is a broader, more comprehensive document that can help uncover areas of financial concern and be used as a roadmap to reach your financial goals.

Financial Planner: Education Certification Skills And Experience

These are the four key elements to becoming a financial planner:

  • Earn at least a bachelors degree in accounting, economics, finance, or a related field, although many advanced and senior positions require a masters degree.
  • Earn CFP certification. Alternatively, financial planners can be certified as a chartered financial analyst by the CFA Institute, or a chartered financial consultant by the American College of Financial Services. In addition, certified public accountants can apply for the add-on certification of personal financial specialist from the American Institute of Certified Public Accountants.
  • Develop strong analytical skills and interpersonal communication skills to ensure a positive working relationship with clients.
  • Gain a solid understanding of different financial instruments and investment options. This allows financial planners to serve clients at all stages of their careers and throughout their lives.

Accounting acumen is only the beginning of the skill set that financial planners need to serve their clients as they progress through the stages of life. These skills are key: analytics and problem-solving communication, presentation, and negotiation networking and relationship management organization and attention to detail.

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Investment Management And Financial Planning Are Not The Same


The two are easy to confuse.

After all, investment management is usually the focus of television ads, cold calls, and mailers for free dinners and seminars. Investment management pays the bills!

Wall Street depends on this machinery to continually draw in investors and grab a share of the commissions and/or fees.

The slick ads feature happy investors who have reached their lifes goals nary a frown to be found, regardless of market conditions.

Its funny how that happens. Only, it doesnt.

The wire houses and other advisors who talk about financial planning, offer, for the most part, a ream of paper with little or no value.

The product offered is typically a generic printout of charts, numbers, and projections that are based on a questionable set of assumptions and facts.

Not a thought is given to the clients particular life, income, goals, values, or timeline.

The really important questions are never asked because the people selling the products, who should be asking, generally have no interest in the answers beyond the products they are charged with selling and promoting.

Their mission is to earn their commission and move on to the next. Yes, I know, the TV commercials and collateral ads would have you believe otherwise.

Now, back to reality.

And Im not talking about the expensive vacation or the upscale car.

Real financial planning does that.

But this is not nearly enough.

2. Find out how long they have been working and in what capacity.

Should I Work With An Investment Advisor Or A Financial Planner

Investment Financial Planning &  Advisor

Financial planners provide clients with advice aimed at helping them enhance their wealth and plan for the future. Some have the certified financial planner certification, while others hold the chartered financial consultant certification. The services financial planners aid their clients with could include retirement planning, estate planning, investment or insurance planning.

As their name indicates, investment advisors focus on investing and the creation of investment portfolios. While financial planners often engage in investing to a certain degree, advisors take things a step further. This difference shows itself in the form of strategy creation, diversification and asset allocation planning. All investment advisors must have a Series 65 license.

The type of investment advisor or financial planner you choose depends solely on your goals. If you want to create a stronger portfolio, an investment advisor who is a fiduciary might be useful.

If improving your overall financial situation is of more importance to you, a financial planner might be the better option. Similar to investment advisors, financial planners come in fee-based, fee-only and commission-based variations.

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Difference Between Financial Planning And Portfolio Management

When we talk about the future, we often ponder about the uncertainty of life and the risks which it may lie ahead in time. This hinders our various life goals whether they are retirement planning, family welfare & medical insurance, planning for childs marriage, accounting for daily expenses, tax planning or any other necessity.

All this thought process leads us to the concept of saving. But considering the concepts of inflation and time value of money, keeping aside a sum of money isnt the best option. This leads to the search of better techniques of saving and creating wealth. In the quest of finding the best alternative we get acquainted to 2 most popular financial terms- Financial planning and portfolio management.

Financial planning and portfolio management are one of the most popular concepts which come to our mind. They are often the answer to the various questions such as how much should be saved for important things like retirement, childs education and marriage etc.

Since these terminologies are interrelated, they are often used inter irreplaceable, however this is not the case. There are a lot of differences between the same.

Do You Need Financial Planning Advice Or Portfolio Management Services

While the terms financial planning and investment advice are often used interchangeably, they refer to different skill sets. As a consequence, two of the more popular designations certified financial planner and registered investment advisor are regulated under different authorities.

In many ways, a certified financial planner is the financial equivalent to a primary care physician. The financial planner generally deals with the clients total financial health.

As in the medical field, when a particular condition or concern arises, a specialist is called upon. In the financial arena, that specialist may be an RIA or an experienced estate lawyer. Consequently, it is not unusual for clients to engage the services of a CFP and an RIA simultaneously or sequentially.

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Which Is Best For Me

For most people, both financial planning and investment advice are beneficial. In order to begin achieving your financial goals, it helps to create a financial plan that can help identify assets, liabilities, and cash flow. By working with a financial planner to build a plan, you can begin to take the correct steps to make progress towards your goals. A financial plan may need to be updated periodically when big life changes occur . The updated plan will re-prioritize your goals with your new situation. Part of the plan may include recommendations for how to better allocate retirement funds or rebalance your overall investment portfolio. This is where investment advice can help you make the right choices based on the time frame around the portfolio and how risky you are as an investor.

Financial Advisor: Work Environments

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The BLS estimates that there were about 263,000 jobs for personal financial advisors in the U.S. in 2019. The agency reports on the percentage of financial advisors working in various industries:

  • Securities, commodities, and other financial investment service firms: 58%
  • Self-employed financial advisors: 19%
  • Insurance firms and related activities: 4%
  • Corporate and enterprise management: 2%

Financial advisors typically work full time, Monday through Friday, but they may meet with clients in the evening or during weekends. As part of their marketing efforts, financial advisors may travel to meet with prospective clients, conduct seminars, or expand their professional and social networks.

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Should You Hire A Portfolio Manager Or An Investment Advisor

Whether you should hire a portfolio manager or an investment advisor depends on your needs and financial goals. If you want only investment-related counsel, opting for a portfolio manager would be a good choice. However, if you want more comprehensive financial support, including investment-related counsel, it is wise to hire an investment advisor.

Alternatively, you can apply these scenarios to get an idea of which type of professional you should hire:

1. Investment support only: If you want a professional to create and manage your investment portfolio, engage with a portfolio manager. For instance, you are a working professional and have no time to manage your investment portfolio. However, you want to invest and create a large corpus for retirement. In this case, you can opt for a portfolio manager who can create a portfolio aligned with your risk tolerance, financial goals, and investment horizon. These portfolio managers may or may not be Certified Financial Planner but should be an RIA.

3. Financial planning without investment advice: If you have a 401 plan and do not need any investment-related advice, but require help with budgeting, first home purchase, long-term healthcare planning, etc., then you can consider engaging with an investment advisor who offers financial planning services part from investment advice. In this case, you can go for a CFP who may or may not be an RIA.

Wealth Management Vs Investment Management: What Is The Difference

The difference between wealth management and investment management can seem insignificant. However, there are vital disparities.

In general, you should think of wealth management as a broader general approach to financial management. It is comprehensive, and it is generally considered one of the most advanced and complex forms of financial planning.

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A Financial Plan Can Help You Create An Investment Portfolio

Your financial plan can give you the full lay of the land: You’ll know what your goals are, how much time you have to reach them, and how comfortable you are with risk. Once you have a comprehensive view, you can figure out how to reach each individual goal.

That will involve both savingsetting aside money you’ll need in the short term or for emergenciesas well as investing, which is setting aside money you’ll need in the long term and that, ideally, can grow. And with your financial plan as a roadmap, you’ll be better able to make thoughtful investing decisionsinstead of heading out without a sense of direction and just hoping for the best.


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