Investment Management And Financial Planning Are NOT The Same

Investment Management And Financial Planning Are NOT The Same

Investment Management And Financial Planning Are NOT The Same

The two are easy to confuse.

After all, investment management is usually the focus of television ads, cold calls, and mailers for free dinners and seminars. Investment management pays the bills!

Wall Street depends on this machinery to continually draw in investors and grab a share of the commissions and/or fees.

The slick ads feature happy investors who have reached their life’s goals; nary a frown to be found, regardless of market conditions.

It’s funny how that happens. Only, it doesn’t.

The wire houses and other “advisors” who talk about Financial Planning, offer, for the most part, a ream of paper with little or no value.

The product offered is typically a generic printout of charts, numbers, and projections that are based on a questionable set of assumptions and facts.

Not a thought is given to the client’s particular life, income, goals, values, or timeline.

The really important questions are never asked because the people selling the products, who should be asking, generally have no interest in the answers beyond the products they are charged with selling and promoting.

Their mission is to earn their commission and move on to the next. Yes, I know, the TV commercials and collateral ads would have you believe otherwise.

Now, back to reality.

Financial Planning — and I mean REAL Financial Planning – is a carefully crafted, living document that begins with a clear understanding of what the client values. The document’s goals are aligned with the client’s goals and values, whatever they may be.

And I’m not talking about the expensive vacation or the upscale car.

I’m talking about authentic, sincere values that you can’t “buy.” These are the issues that allow people to put their heads on the pillow at night and feel a sense of comfort from addressing the really big issues.

When I say “the really big issues,” I mean issues like the ability to outlive a nest egg, protect children or spouses, leave a legacy, retain dignity in the face of illness, have well-crafted documents that allow for orderly disposition, and know that the minimum taxes possible are being paid.

People feel comfortable and safe when they have addressed the potential life transitions that are on the horizon. Things like educating their children to the extent they feel is appropriate based on their desires and resources are major decisions that need to be made intelligently and thoughtfully.

They feel safe when they talk about their transition from their work-life to their retirement-life, and importantly, that the aspects of retirement have been considered and addressed.

Real Financial Planning does that.

Having your investments properly allocated based on your ability to withstand risk in conjunction with your time horizon is vitally important. But remember, it isn’t everything — it’s the topic that the purveyors of investment products want to talk about and promote.

They might show you pictures of children on swings or couples retiring on the beach. But don’t get wrapped up in the images of the life they’re trying to sell you – because you must always know that at the same time, they’re telling you to buy their investments. There’s no “there” there.

They want your hard-earned dollars to buy their funds, their management, their annuities, their life insurance and stock and bond selections, all wrapped with a pretty bow to make you feel good.

But this is not nearly enough.

The problem is that usually, the organizations that are genuinely interested in helping their clients don’t have an advertising budget that can compete with the recognizable names, who spend their dollars creating amazingly unrealistic portrayals of success represented by well-known actors.

Consumers need to know that they have better alternatives and options beyond the traditional big names.

If you are working with an advisor who is associated with one of these companies and he/she talks to you about planning, consider the following:
1. Look them up on Brokersearch. Check to see if there are complaints against them.
2. Find out how long they have been working and in what capacity.
3. Ask how they are compensated.
4. Question their education and any designations. Beware of alphabet soup (you know, the meaningless designations).
5. Research the firms they work with and check for disciplinary actions and fines.
6. Ask for a redacted copy of three or four financial plans they’ve created. Look for whether the plans are customized and address real issues or if they are just generic boilerplate junk.
7. Ask for references.
8. Listen to the questions you are being asked. Do they really get down to the guts of your values or is your conversation glossed over in favor of questions about your vacation plans?
9. If you are asked for your tax return and brokerage statement at the initial meeting, understand that you are being judged and sized up for your profit potential.

There are options.

If you aren’t satisfied with the answers you receive or the information you uncover, check out NAPFA (, the association of Fee-only advisors. Follow the same questions as above and see if the answers are the same or different.

Investment management is merely a part of Financial Planning. It should be incorporated as a part of your financial life — it needs to be properly incorporated with the rest of your financial concerns.

Consider that its prominence in commercials and advertising is due to large advertising budgets and a good ROI. Sounds fishy to me!