Michael Weiss

Financial Advisors, Financial Planners and Investment Managers

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 advisors, financial planners and investment managers.

Financial Advisors.  These investment professionals, also known as brokers, financial consultants, wealth managers and wealth advisors, are paid primarily to sell investment products and services.  In other words, these professionals are primarily sales people and/or relationship managers.  A relatively small percentage of these professionals have substantial analytical or academic investment experience.  Hence, some financial advisors 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 advisors.  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 charterholders.  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 $750,000.  Today, some of the larger money management companies are only willing to manage smaller accounts within a cookie cutter framework.  Large firms sometimes 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 and academic experience.  In addition to having substantial investment experience, an investment manager should either have an advanced degree from a well-regarded school or be a CFA charterholder.  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.

2.  An investment manager with considerable analytical and/or academic experience.  Managers should be CFA charterholders and/or have good academic backgrounds.

3.  Portfolio managers who are accessible.  Communication is very important, especially when financial markets are volatile.

4.  Small firms.  At a small firm, you generally know who is managing your money.

5.  Firms with conservative investment approaches.  Taking excess risk very often has a negative impact on your portfolio.

6.  Portfolio managers who are good listeners.  Meetings with a manager are important only if the manager listens to you.

7.  A portfolio manager should have experience in both good and bad markets.  Down market experience is especially important, as mistakes can be very costly during bad markets.

8.  Money managers who treat you with respect.  A manager should never make you feel like you are asking a stupid question. 

Who to Avoid

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

4.  Any investment professional who guarantees returns.

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