There are two types of money experts out there — financial planners and investment managers — and it can be difficult to differentiate between the two. However, although they have similarities, there are many differences between them that distinguish one from the other. Both are skilled at managing money and investments but they each have separate roles within the world of finance.
When you start out in your adult life–completing college, getting married, having kids, and buying a house–, you may begin to embark on the financial planning part of ensuring your dreams for the future come true. Financial plannera can help you determine how much to save for retirement and how much house you can afford. As you get older, they may also provide advice on when to start collecting social security benefits. While financial planners can be investment advisers, investment advisers aren’t necessarily financial planners, according to the U.S. Securities and Exchange Commission. Financial planners typically give advice on several aspects of your financial life–from saving, investing and insurance to taxes, estate planning and retirement–providing a detailed plan to meet all those goals. Because “financial planner” is such a broad term, you want to protect yourself against hiring an amateur, as many people can call themselves financial planners. To get the best person for your needs, focus on those who boast credentials, such as Certified Financial Planner or Personal Financial Specialist, advises CNN Money. This ensures they have undergone certain levels of training and meet certain standards.
When you hire an investment manager, you build on the basics by further diversifying into specific investments that make up the bulk of your portfolio. Investment managers help you choose investments in equity or fixed income markets, monitor your assets, ensure those assets are in line with your specific investment policy, manage and understand your monthly or quarterly statements, and provide advice when it comes to tax loss harvesting. Investment managers differ from financial planners in that they micro-manage more (focusing on stocks, bonds, exchange traded funds and mutual funds) helping you build and benefit from a diverse portfolio. As with the financial planners, do your research on any investment managers you consider, looking into their background for disciplinary problems or complaints, says CNN Money.
Finding a Balance
Though financial planning and investment managing are separate entities, each with their own focus areas, you don’t necessarily have to hire two different professionals. Many professionals are two-in -one: acting as both financial planner and investment manager. You can choose to hire one person as your go-to source for all-in-one financial advice and direction. Or, you can hire two separate people to handle these distinct functions. You may be confused at all the titles out there though, as these professionals can call themselves financial advisers, wealth managers, portfolio or money managers, and so on. If you’re looking for a specialist in one particular area, it’s best to call each one you’re considering to find out what their specialties are. Asking questions and doing research will direct you to the right person who can help you protect and grow your hard-earned money.
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Ryan Larsen is a economics blogger who loves sharing his money tips with an online audience. He writes about making sound investments in a variety of fields, and works alongside both financial planners and investment managers.