Comparing Financial Advisors and Investment Specialists: Which One Offers the Most for Your Money?
In a recent study conducted by the American College of Financial Services, titled "Advising Through Uncertainty Study," the roles and value of financial planners and investment managers were examined in detail.
The study revealed that the primary difference between these two groups lies in their focus and client behaviour during market uncertainty. While investment managers concentrate mainly on managing the investment portfolio, financial planners tend to focus on broader financial planning.
One key finding was the reaction of clients to market shocks. Clients who work with financial planners exhibit less anxiety and reactionary behaviour compared to those relying solely on investment managers during volatile times. This is reflected in the number of client inquiries during market uncertainty, with investment managers fielding more inquiries (45%) than financial planners (33%).
The study also showed a difference between the clients of the American College of Financial Services designees and non-designees. Designees were significantly less likely to describe their clients as anxious and to receive client requests to change their investments.
Private wealth managers who offer a "complete suite of financial planning and investment services" attracted clients with assets under management more than triple those of investment planners. The study suggests that a broader story resonates with clients who want planning value that makes their portfolio resilient.
The study recommends considering the business case for true comprehensive planning, which requires not just service offerings, but the expertise to back them up. A true comprehensive financial planner can weather market gyrations because their asset fee or planning fee is tied to tangible value outside portfolio performance.
The value of a financial planner is generally more forward-looking and incorporates services beyond asset growth, including estate planning, income planning, charitable planning, and tax planning. The study suggests that lifelong learning and mentorship are crucial for building competence, confidence, and effective communication in financial professionals.
Differentiation comes through competence and confidence, as shown by the survey revealing that financial professionals with American College of Financial Services designations were more competent and confident compared to advisers with no designations. The study found that designees experienced fewer portfolio revision requests and fewer client inquiries during market uncertainty compared to non-designees.
It is important to note that the experts included in the study, such as professional wealth managers, fiduciary financial planners, CPAs, and lawyers, never pay for inclusion on the site.
The study positions all-weather financial professionals as those providing broad and specialized financial planning services, including tax, income, charitable, legacy, and estate planning. The study advises putting market volatility and economic uncertainty in context by communicating complex concepts simply and effectively. The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning, and tax strategies.
- In a bear market, investors seeking a more comprehensive approach to managing their finances might find more value in working with financial planners who offer services beyond asset growth, such as estate planning, income planning, charitable planning, and tax planning.
- The American College of Financial Services' "Advising Through Uncertainty Study" found that financial planners tend to focus on broader financial planning, which results in less anxiety and reactionary behavior among their clients during market uncertainty, as compared to investment managers who primarily focus on managing the investment portfolio.
