Do You Need a Financial Planner or an Investment Manager?

by Manisha Thakor

If the terms “financial planner” and “investment manager” seem interchangeable to you, you’re not alone. Many people — even financial professionals — have a hard time differentiating. To truly maximize your financial well being, it’s important to understand the difference.

Confusion is common because the terms don’t just describe job titles; they also refer to distinct parts of an integrated financial process: financial planning and investment management.

Think about a house. When you build from scratch, you need an architect (who creates a detailed blueprint) and a builder (who executes in accordance with the plans). While their work is intimately connected, the architect and builder are attending to very different – yet equally important – parts of the ”dream home” process.

When you build your financial house, “financial planning” is the process of architecting a vision of your future. During this process your financial professional will ask (and help you answer) essential questions, such as:

  • Am I currently saving enough to meet my retirement goals?

  • How much house – or car – can I afford given my income and assets?

  • When should I start taking Social Security?

When you engage in “investment management,” you build on that financial plan by choosing the specific investments with which you’ll construct your portfolio. Investment management involves:

  • Selecting investments for purchase in areas such as the equity and/or fixed income markets

  • Monitoring and rebalancing assets, ideally in accordance with a written investment policy statement

  • Tax loss harvesting where appropriate

When it comes to your dream home, you can find one organization that will both craft the architectural plan and build your house –or you can decouple the process. Similarly, when it comes to your ideal financial life, you can find one financial professional to help you with both financial planning and investment management –or separate the two services.

That’s where’s where the job titles can get confusing. Financial services professionals sport a wide array of them: financial planner, financial advisor, wealth manager, portfolio manager, money manager, investment manager, etc. Unlike the building profession, where the difference between an architect’s duties and a builder’s are crisply distinguished, the titles used in the financial services industry do not provide upfront definitions on who does financial planning and who does investment management. Some professionals will do both while others – with the exact same titles – are specialists. Consequently, it’s easy to waste time and money engaging a financial professional to fulfill one duty when what you really need is the other!

What’s an investor to do?

Before engaging your financial professional, go beyond the title to truly understand their specialty. As an example, in my wealth management practice I focus on helping women and families with $1 million to $25 million in liquid assets. For this niche market my firm provides three services, which cross the lines of both financial planning and investment management. Specifically we:

  • Plan: Help clients align savings rates with retirement and other financial goals (or help clients determine how much they can comfortably spend per year if they are in retirement).

  • Invest: Use Monte Carlo analysis to set an appropriate asset allocation in conjunction with an assessment of a client’s willingness, ability and need to take risk – and then invest in accordance with a written investment policy statement, using an “evidence-based” approach.

  • Clarify: Assist clients as they work with other financial professionals (accountants, insurance agents, estate lawyers, etc.) through a process called financial life planning.

My firm offers a very specific objective for a particular type of person. It’s not intended to be a fit for everyone. But for the right person it feels like home sweet home.

The bottom line. Whether you need an architect, a builder or both, understand that your needs are unique; due diligence is required to ensure no matter what their “title”, you’ve found a professional who offers the financial services you really need. It’s your hard earned money and your future, and every question is worth asking.

[Want more financial love? You can follow Women’s Financial Literacy Initiative founder, Manisha Thakor, on Twitter at @ManishaThakor or on Facebook at /MThakor.

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