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Are You Getting Financial Planning or Investment Management from Your Financial Advisor?

Investment management and financial planning are terms that are often used interchangeably. While they are both important tools in growing wealth, they are two distinctly different concepts and practices, offered by two different types of financial professionals, providing two different types of services.

If you’ve started seeing or are considering working with a financial professional, it’s important to understand if they’re offering investment management or true financial planning services.

Keep reading to learn more about the difference between investment management and financial planning, as well as what should be included a financial plan created by an advisor.

What is Investment Management?

A financial professional specializing in investment management works with clients to help them meet their investment goals by managing their investment portfolio. The portfolio may include stocks, bonds, mutual funds, and other investment tools based on the client’s goals, risk tolerance, and various other criteria. They find investments that they believe will maximize their client’s returns and buy, sell, and trade securities on their behalf.

While investment managers are experts in managing portfolios, they do not provide guidance, assistance, or advice on structuring any other aspects of their clients’ finances.

Simply put, investment management is strategic management on investment portfolios.

What is Financial Planning?

Financial planning is a more holistic practice than investment management. A financial planner looks at their client’s entire financial situation and considers their short- and long- term goals, current and ideal lifestyle, and their unique situation. They use this information to create a comprehensive plan, designed to help their client meet their goals.

This plan, of course, includes investment management, and a good financial advisor will be able to manage their clients’ investment portfolios, but it’s only one piece of the puzzle, whereas, for an investment manager, it’s the entire picture.

What Should Be in My Financial Plan?

A financial advisor starts your relationship by meeting with you to get a full picture of your current financial situation. They’ll discuss your goals, both personally and financially and gain an understanding of what you want to use your money for. The advisor will work with you to define your risk tolerance, the ideal timeline for each of your goals, and what your top priorities are.

They’ll then create a financial plan that encompasses your entire financial picture. For some clients, this starts by creating a budget to make sure the right amount of money is being allocated to various savings accounts, investments, and future planning. They’ll help clients create and appropriately fund an emergency savings account, as well as set up additional savings accounts earmarked for specific goals, such as a 529 for college savings, a downpayment on a home, or a child’s wedding. The financial advisor also looks towards the future to ensure retirement is being properly funded and, when the time comes, the retirement nest egg is cracked open the right way, helping you get the most of your money in retirement so you can enjoy your golden years.

For clients with unique income benefits, such as stock options or deferred compensation, a financial planner will help their clients keep more of their money by teaching their clients how these benefits can be leveraged to lower their tax burden and fund their future.

A financial planner will also help with estate planning and create a plan that effectively transfers generational wealth.

Investment management is an important part of this financial plan, and all strategies are designed and implemented with the client’s full financial picture in mind.

In this way, your financial plan provides a clear way to structure every aspect of your financial life, providing guidance and actionable advice that helps you reach your goals.

Investment management is an important tool in growing wealth and reaching both short- and long- term goals. For individuals looking to ensure that their investment portfolio is operating as well as possible without being exposed to more risk than they’re comfortable with, an investment manager is a great option.

However, if your financial advisor is only focusing on your investments, they’re not providing a true financial plan.

A financial planner analyzes your entire financial situation, helps you determine what your goals are, and creates a roadmap to achieve them. They help you find the right balance between saving and investing, teach you financial management skills, prioritize both short- and long- term goals, and make sure you are well positioned for the future.

Advisory services are provided by The Tranel Group (“TTG”). TTG is registered a registered investment advisor and only transacts business in the U.S. in states where it is properly registered or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by the SEC or any other securities regulator and does not mean the advisor has attained a particular level of skill or ability. Content should not be viewed as personalized investment advice. There is no guarantee that the investment objectives will be achieved.

This blog is for informational purposes. Certain information contained herein (including any forward-looking statements and economic and market information) has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, The Tranel Group does not assume any responsibility for the accuracy or completeness of such information. The Tranel Group does not undertake any obligation to update the information contained herein as of any future date.