The Difference Between an Investment Manager and Financial Planner

difference between investment manager and financial planner

One of the problems in the financial industry is the presence of easily interchangeable words. For example, when people think of ‘investment managers’ and ‘financial planners’, you might consider them to be the same thing. However, they are two very different occupational roles that need to be understood, otherwise you may end up spending a lot more money on the wrong service.

Investment managers focus only on investing assets. Their job is to make you money with the money you already have by investing in stocks, bonds, alternative investments, etc. This is more like what broker-dealers do, along with robo-advisors like Betterment and Wealthfront. Although some of these robo-advisors and other websites call themselves “financial advisors”, in reality, they are far from it.

A true financial planner has a much more holistic job. A financial planner’s role can include investment management but more often, they hold generalist roles that can breach a number of topics in a client’s financial life. Some other common topics that are discussed by financial planners include cash management, insurance, income tax planning, company employee benefits, credit cards, student loans and estate planning. The range of possible services is much more than the limited services offered by investment managers proclaiming to be “financial advisors”.

Branching off the last point, some of the sites and apps out offering investment management, include human services. You would be able to call up a “financial advisor” for an added fee but the largest limitation is that their advice is limited to the investments you are making with them. You wouldn’t be able to call them up for advice on insurance, company’s employee benefits or anything else outside those investments. Paying extra money to these “financial advisors” for a few conversations a year is not worth the cost and would better be spent on hiring a real financial advisor that would be able to guide you through your situation in a more complete manner.

If you are considering receiving assistance with your finances, be sure to look more closely at what services they provide when they say they are “financial advisors”. It could end up saving you a lot of money.