| Understanding the differences between financial | | | | with limited investment experience. |
| advisors, financial planners and investment managers | | | | So where can the average person turn for sound |
| can be challenging for the average person. | | | | thoughtful investment advice? I would highly |
| Finding a suitable investment professional is not easy. | | | | recommend seeking an independent investment |
| The number of different titles alone is enough to make | | | | manager with considerable analytical and academic |
| your head spin. But in a nutshell, there are basically | | | | experience. In addition to having substantial investment |
| three different types of investment professionals: | | | | experience, an investment manager should either have |
| financial advisors, financial planners and investment | | | | an advanced degree from a well-regarded school or |
| managers. | | | | be a CFA charterholder. You will, however, have to do |
| Financial Advisors. These investment professionals, | | | | your homework in order to find one of these |
| also known as brokers, financial consultants, wealth | | | | managers willing to manage a smaller account. |
| managers and wealth advisors, are paid primarily to sell | | | | What to Look For |
| investment products and services. In other words, | | | | 1. Independent investment management firms. Money |
| these professionals are primarily sales people and/or | | | | managers who are independent have fewer conflicts |
| relationship managers. A relatively small percentage of | | | | of interest. |
| these professionals have substantial analytical or | | | | 2. An investment manager with considerable analytical |
| academic investment experience. Hence, some | | | | and/or academic experience. Managers should be |
| financial advisors obtain an account and then | | | | CFA charterholders and/or have good academic |
| outsource the investment management function to | | | | backgrounds. |
| another department within their firms. | | | | 3. Portfolio managers who are accessible. |
| Financial Planners. These investment professionals are | | | | Communication is very important, especially when |
| also sometimes known as Certified Financial Planners, | | | | financial markets are volatile. |
| wealth managers and wealth advisors. Financial | | | | 4. Small firms. At a small firm, you generally know who |
| planners are generalists who help clients by providing | | | | is managing your money. |
| advice regarding investment management, retirement | | | | 5. Firms with conservative investment approaches. |
| planning, tax planning, estate planning and other areas. | | | | Taking excess risk very often has a negative impact |
| Some financial planners also outsource a substantial | | | | on your portfolio. |
| portion of their investment management and other | | | | 6. Portfolio managers who are good listeners. Meetings |
| responsibilities to other professionals. Some financial | | | | with a manager are important only if the manager |
| planners do not have very strong investment | | | | listens to you. |
| backgrounds. In fact, many financial planners come | | | | 7. A portfolio manager should have experience in both |
| from other professions such as accounting, law and | | | | good and bad markets. Down market experience is |
| sales. | | | | especially important, as mistakes can be very costly |
| Investment Managers. These investment professionals, | | | | during bad markets. |
| also known as money managers, portfolio managers | | | | 8. Money managers who treat you with respect. A |
| and investment advisors, traditionally have extensive | | | | manager should never make you feel like you are |
| analytical and academic experience. Investment | | | | asking a stupid question. |
| managers often hold advanced degrees and may also | | | | Who to Avoid |
| be CFA charterholders. Many investment managers | | | | 1. Most financial advisors, also sometimes known as |
| work as investment analysts during the early parts of | | | | brokers, financial consultants, wealth managers and |
| their careers and then advance to more managerial | | | | wealth advisors. |
| type roles. Investment managers are normally paid | | | | 2. Some financial planners. These professionals |
| primarily to invest money based on the investment | | | | sometimes come from other professions and may |
| objectives of their clients. | | | | have limited analytical or academic investment training. |
| It is not easy to find a high quality investment manager | | | | 3. Most accountants offering investment services. |
| willing to manage assets below $750,000. Today, | | | | Some accountants offer their existing clients |
| some of the larger money management companies | | | | investment services despite having somewhat limited |
| are only willing to manage smaller accounts within a | | | | investment experience. |
| cookie cutter framework. Large firms sometimes | | | | 4. Any investment professional who guarantees |
| place smaller accounts on models and delegate some | | | | returns. |
| of the investment management responsibility to people | | | | |