Investment Management vs. Financial Planning (Part 1)

One other comment on Dr. Mark Perry’s July 2014 blog post addressed financial planning and investment management:

     > At the higher asset levels in particular, clients of the major
     > full service firms are likely to be serviced by teams, some of
     > whom may have CFAs, law degrees or other advanced degrees
     > and designations.

These are the investment managers and this is the first description I have seen of “people/entities like myself.” In lieu of my expensive pharmacy degree, I find “law degrees” to be interesting. I think both place heavy emphasis on critical thinking.

Contrast the above description with this excerpt from study.com on typical education for a financial advisor:

     > While there may be no official [education] requirements…
     > most employers prefer those who have a college education.
     > Some colleges and universities offer undergraduate and
     > graduate degree programs in financial advising. Degrees
     > in business, accounting or finance is also recommended…
     >
     > Coursework in financial advising programs often includes
     > investing tactics, retirement planning and insurance…

I would like to see a syllabus for the average investing course(s).

     > Certificate programs in financial advising are available for
     > those who already hold a degree. These programs are offered
     > online, on-campus or through professional workshops. Options
     > for financial advising certificate programs can include
     > risk management, tax planning and employee benefits.

The reader also listed other financial planning* activities. I like this better than my brief list:

1. Proactively calling when it’s a good time to refinance your mortgage(s), handling all the tax return information, paperwork, and seeing it through to closing
2. Specific-expense & cash flow financial planning
3. Assiduous year-round tax loss harvesting
4. Proactively coordinating 1099 delivery to your CPA at tax time
5. Complimentary review of trusts and estate structures by an on-staff attorney
6. Quarterly in-person performance review vs. global balanced benchmarks
7. Private equity capital-call liquidity planning
8. Review of life insurance products and applicability
9. Social security optimization
10. Retirement planning
11. Educating adult children about capital markets, investing, and capital preservation

I would want a colleague with related expertise to handle all but #6, perhaps. I think the investment manager is in a better position to discuss performance.

With regard to fees, Investopedia interviewed Arden Rodgers, financial advisor with Arbus Capital Management:

     > You may want to hire a financial advisor to manage investments…
     > [they] usually charge a percentage of your… AUM each year.
     > This… fee can vary based on a number of factors including the
     > expertise of the manager… the size of the firm… investment
     > strategy… amount of money you are investing [but] the typical
     > range of AUM fees for investment managers is 0.5% to 3.0%.

Once again, my 2% seems reasonable.

In summary, between investment managers, financial advisors, financial planners, and investment advisors (not to mention “advisers” or “advisors”—both of which are acceptable), the industry is somewhat of a mess. My brain wants to create some boundaries where none may really exist.

* As one further layer of complexity, “Financial advisor” is not necessarily the same thing as “financial planner” particularly
   when a professional has the Certified Financial Planner credential.