When discussing financial advice, it is common for the terms “investment management” and “financial planning” to be used interchangeably. It is important to outline the difference between investment management and financial planning and emphasize why we believe it is important the two intermingle.
Investment management is the careful art of determining a client’s ability to tolerate risk, understanding their investment time horizon, and creating an investment portfolio that embodies both. This may seem simple in theory, but the process usually takes hours of getting to know the client, researching different investment options, evaluating different investment opportunities throughout the world and putting this all together in an investment portfolio. Education also plays a large part in the investment management world, as the advisor should help their client understand what they are invested in. Investment management usually plays a large part in how financial advisors are paid, whether that is through a commission-based, fee-based or fee-only structure.
True financial planning is taking the time to learn the intricacies of a client’s situation and creating a unique, living financial document that outlines their goals, both short and long-term. The plan will usually evolve over the years. Financial planning spans a variety of areas including retirement, investing, education, insurance, and taxes. When looking for financial planning advice, a CERTIFIED FINANCIAL PLANNER™ is an important designation to seek out. To obtain this designation, it requires an advisor to have years of experience, a demonstration of ethics, a formal education, and the passing of standardized exams. Financial planning helps clients to feel more comfortable as you approach life’s transitions.
The Wealth Management Approach
When it comes to financial advice, some professionals specialize in investment management and some focus on financial planning. At Sharkey, Howes & Javer, we believe it is usually in the client’s best interest to utilize a combination of financial planning and investment management as tools to more efficiently help reach their goals. To discuss more about our wealth management approach, reach out to us today.