Editor’s Note: This post was originally published in December 2015 and updated January 2017.
While financial advisors and money managers have many commonalities, and are complementary to one another, the two jobs are very different and are rarely held by one individual. Financial advisors – also referred to as wealth managers, financial planners and investment advisors – understand the specifics of their client’s financial lives and create a detailed, comprehensive investment plan that is best positioned to help you reach your financial goals. Money managers on the other hand spend their time focusing on successfully managing the strategies that your portfolio is invested in.
WrapManager's eBook, Guide to Researching Money Managers, discusses this topic in more detail, but we believe your financial advisor and your money managers should be different people. This allows for additional checks and balances that wouldn’t exist if one person performed both jobs. After all, no self-respecting chef would disparage their own food!
The Role of Financial Advisors
To dive into it a little more, a financial advisor should do just that—advise. Here is what we believe all financial advisors should do for their clients:
- Understand the specifics of their financial lives—investments, debt, cash flow needs, etc.
- Learn about a client’s family and their goals
- Create a detailed and comprehensive investment plan
- Recommend money manager strategies to handle investments
- Regularly review and adjust the financial plan
- Continually evaluate money manager strategies to ensure they are the best for the client’s individual plan
The Role of Money Managers
Money managers should also stay true to their name, and spend their time focusing on successfully managing portfolio strategies. Quality money managers should consistently meet these expectations:
- Manage investment portfolios consistent with their stated investment objectives
- Manage risk appropriately
- Avoid unnecessary turnover within the management team
- Operate transparently
The Reason You Need Both
Combining the investment skills of talented money managers hand-selected for your plan with a qualified financial advisor can put your financial planning strategy on track and help you work toward meeting your own personal financial goals. On one hand, the financial advisors hold the money managers accountable for their investment decisions and performance by monitoring them and making changes as appropriate. On another hand, the investor holds the financial advisor accountable for their ability to keep the investment plan on track. And, finally, the financial advisor holds the client accountable to their financial plan by performing regular reviews and adjustments as needed and helping to eliminate the desire to make short-sighted changes based on emotional triggers in the market.
So how can you find out whether your financial advisor has your best interest in mind? And how can you find a better financial advisor if they don’t?
Download WrapManager's Guide to Finding a Better Financial Advisor to answer these questions and more.
WrapManager works closely with our clients to create investment plans and recommend money manager strategies to implement a plan that best suits your unique life. To learn more about Money Managers and Financial Advisors, give us a call at 1-800-541-7774 or contact us here.
