While it is not uncommon to use the terms portfolio management and financial plan interchangeably, they are two different staples in the financial services industry. Portfolio management refers to the creation and maintenance of an investment account. Financial planning, on the other hand, is the process of establishing overall financial goals and creating a plan for achieving them.
Portfolio managers are typically more experienced and have a better career because they deal with the complexities involved in investing. Financial planners are typically in junior positions.
While portfolio managers and financial planners may share the same designations (although a specific certification does not necessarily apply), they can have different designations. These designations include Chartered Financial Analysts (CFA), Certified Financial Planners (CFP), or Chartered Financial Consultants (ChFC). Knowing the differences between these types of advisors can help you choose the right financial professional for you.
Financial Planning
Financial planning is more detailed than portfolio management. Financial planning is a comprehensive assessment of an individual’s financial situation with the goal of setting long-term financial goals. Financial planning can include building an emergency fund, saving money for retirement, and saving for college.
To create a comprehensive financial plan one must first take stock of all assets. This would include an assessment of all assets such as real estate, savings accounts, retirement accounts, investment accounts, and outstanding debt.
Portfolio Management
Financial professionals manage portfolios that include stocks, bonds, and mutual funds. They also recommend portfolios that contain alternatives investments. This is to help meet investors’ investment goals. Portfolio managers manage a portfolio of assets and make recommendations about products to meet the investor’s investment goals. A financial planner recommends specific products based on an individual’s objectives.
Portfolio managers are professionals who are focused on satisfying investors’ needs through the rate of return within a portfolio. They are often responsible to rebalance the account in order to keep it in line with investors’ allocation preferences.
Portfolio managers are subject to fiduciary obligations. This is a key difference between financial advisors and portfolio managers. They are expected to manage clients’ investments in good faith and to prioritize client interests in any investment decision.
The Bottom Line
Financial planning, at its most basic, is about managing your financial resources and budgeting accordingly. Portfolio management, on the other hand, is how you invest your existing capital to increase your wealth.
This post was written by All Seasons Wealth. At All Seasons Wealth, we provide expert advice and emphasize the importance of creating in-house portfolios to personalize your strategy for asset management, financial planning, and cash management. We utilize research and perform market analysis to provide you with a Financial Planner In St Petersburg FL. No matter your needs, we can work with you to develop a consulting solution tailored to you.
Any opinions are those of All Seasons Wealth and not necessarily those of RJFS or Raymond James. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Investing involves risk and you may incur a profit or loss regardless of the strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Past performance may not be indicative of future results.