There’s a Difference: Financial Advisors, Financial Planners and Investment Managers

April 5, 2010 | By Steven DiGregorio

Understanding the differences between financial advisors, financial planners and investment managers can be challenging for the average person.  Finding a suitable investment professional is not easy. The number of different titles alone is enough to make your head spin. But in a nutshell, there are basically three different types of investment professionals: financial advisers, financial planners and investment managers.

Financial Advisors.

These investment professionals, also known as brokers, financial consultants, wealth managers and wealth advisers, are paid primarily to sell investment products and services. In other words, these professionals are sales people first and/or relationship managers second. The advice you receive may be driven by a commission for a certain product being sold.  A relatively small percentage of these professionals have substantial analytical or academic investment experience. Hence, some financial advisers obtain an account and then outsource the investment management function to another department within their firms.

Financial Planners.

These investment professionals are also sometimes known as Certified Financial Planners, wealth managers and wealth advisers. Financial planners are generalists who help clients by providing advice regarding investment management, retirement planning, tax planning, estate planning and other areas. Some financial planners also outsource a substantial portion of their investment management and other responsibilities to other professionals. Some financial planners do not have very strong investment backgrounds. In fact, many financial planners come from other professions such as accounting, law and sales.

Investment Managers.

These investment professionals, also known as money managers, portfolio managers and investment advisors, traditionally have extensive analytical and academic experience. Investment managers often hold advanced degrees and may also be CFA or CIMS. Many investment managers work as investment analysts during the early parts of their careers and then advance to more managerial type roles. Investment managers are normally paid primarily to invest money based on the investment objectives of their clients.

It is not easy to find a high quality investment manager willing to manage assets below $500,000. Today, some of the larger money management companies are only willing to manage smaller accounts within a cookie cutter framework. Large firms often place smaller accounts on models and delegate some of the investment management responsibility to people with limited investment experience.

So where can the average person turn for sound thoughtful investment advice? I would highly recommend seeking an independent investment manager with considerable analytical/academic experience. In addition to having substantial investment experience, an investment manager should either have a degree from a well-regarded school or be a CFA or CIMS. You will, however, have to do your homework in order to find one of these managers willing to manage a smaller account.

What to Look For

1. Independent investment management firms – Money managers who are independent have fewer conflicts of interest.  These tend to be smaller firms, where you are more than just a number.

2. Experience – An investment manager with considerable analytical and/or academic experience. Managers should be CFA or CIMS and/or have good academic backgrounds.  They should also have experience in both good and bad markets.  Mistakes can be very costly during bad markets.

3. Transparency – You should understand the fees associated with managing your assets, preparing the financial plan or Investment Policy Statement.  You should have an open discussion and a signed agreement.

4. Communication – Find a Portfolio Manager who is accessible and is a good listener. Communication is very important, especially when financial markets are volatile.  The manager should take the time to answer your questions clearly and never make you feel that you’re asking a stupid question.

5. Conservative investment approaches. – Taking excess risk very often has a negative impact on your portfolio.  If you lose less money in a “down market” you start out with “more” money when the market returns to positive performance.  It pays to be somewhat prudent.

Who to Avoid

1. Most financial advisors, also sometimes known as brokers, financial consultants or wealth advisors.

2. Some financial planners. These professionals sometimes come from other professions and may have limited analytical or academic investment training.

3. Most accountants offering investment services. Some accountants offer their existing clients investment services despite having somewhat limited investment experience and a smaller product set.

4. Any investment professional who guarantees returns.  The biggest warning sign of all!  Run!

Hopefully, this new understanding will take some of the guesswork out of selecting the proper guide to your financial success.

For more information contact us at 845.563.0537 or

The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm.  Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.


Tags: 401(k), 403(b), 457, bonds, financial advisors, financial planners, financial planning, investing, investment advisors, investments, IRA, pension, retirement, retirement income, retirement plan, Retirement Planning, rollover IRA, ROTH, stocks

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STEVEN M DIGREGORIO is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC.
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