Portfolio Management vs. Fin✱ancial Planning: An Overview

Although it is common for some to use the terms "portfolio management" and "financial planning" interchangeably, these staples of the financial services industry are not the same.

Portfolio management involves managing a portfolio of securities to build an investment account's value and to support a client's investment objectives.

Financial planning is the process of deciding upon various financial goals and creating a plan oღf action to achieve them. Some consider portfolio management to be part of financial planning.

Usually, portfolio managers have greater investment knowledge and are further advanced in their careers, w✱ith the experience and expertise to 🍨handle the complexities of investing. Financial planners typically start out in more junior roles.

Understanding the differences between the two types of advisors can help inves🍸torܫs select the most suitable financial professional for their needs.

Portfolio Management

Portfolio management is provided by financial professionals who build portfolios of stocks, bonds, 澳洲幸运5开奖号码历史查询:mutual funds, exchange traded funds (ETFs), or other investments (e.g., 澳洲幸运5开奖号码历史查询:alternative investments) to meet the investment objectives of individual and institutional investo𝄹rs.

Typically, a portfolio manager:

• Develops and implements investment strategies based on clients' stated needs to help them achieve their investment goals
• Buys securities, sells them if/when necessary, and otherwise manages the portfolio according to the established investment strategy
• Remains abreast of market conditions, business developments, and political issues that could affect client portfolios
• Keeps clients informed of research highlights and market activity, especially that which is unexpected and may affect portfolio value
• Meets with clients at least annually to review 澳洲幸运5开奖号码历史查询:investment objectives and portfolio allocations
• Rebalances asset allocations as needed

Professionals who manage portfolios are focused on meeting the needs of investors through the 澳洲幸运5开奖号码历史查询:rate of return achieved by a portfolio.

Rebalancing asset allocations is done when asset values change and holdings must be adjusted to stay in line with an investor's allocation targets and risk tolerance.

One important difference between financial planners and portfolio managers is that a portfolio manager acts as a 澳洲幸运5开奖号码历史查询:fiduciary.

That means they are legally obligated to manage investments on behalf of their clients in good faith and in a trustworthy manner. They must place their clients' best interests ahead of their own.

Financial Planning

Financial planning is a broader field than portfolio management. It involves an assessment of an individual's or entity's overall financial standing with the intention of developing short- and long-term financial goals.

Once those goals are established, a financial planner can provide a compreh𝓰ensive financial plan that can help a client to 🍌reach them.

The goals can include (but aren't limited to):

• Establishing and managing a budget
• Building an emergency fund
• Saving for a new home
• Reducing debt
• Accumulating wealth
• Investing for retirement
• Saving for a child's college education
• Estate planning
• 澳洲幸运5开奖号码历史查询:Tax efficiency

Before creating a comprehensiv🐻e financial plan, a financial planner will help you take complete stoꦿck of your entire net worth.

This would includ🎃e accounting for source🌌s of income, any outstanding debt, and a valuation of all assets, such as a home, savings, retirement plans, and investment accounts.

A financial planner isn't necessarily a fiduciary, unless they give investment advice and make investment decisions for clients.

Special Considerations

Licensing

Portfolio Managers

Portfolio managers are required to be licensed by the 澳洲幸运5开奖号码历史查🙈询:Financial Industry Regulatory Authority (FINRA). They need at least a Series 7 license to buy and sell most securities.

Those who manage $25 million or more in🐼 assets must register with ꧒the U.S. Securities and Exchange Commission.

Financial Planners

Financial planners who work closely with clients to create comprehensive financ🌃ial plans are not required to b𒐪e licensed.

However, they may choose to become formally recognized for their areas of focus with particular certifications, such as that for a 澳洲幸运5开奖号码历史查询:Certified Financial Planner.

If a financial planner offers investment advice or buys and sells securities for clients, the🥀y must be licensed to do so.

The Bottom Line

Broadly speaking, financial planning involves guidance that helps you develop a plan to reach short- and long-term financial goals. It can help you establish a budget and a savi෴ngs process, plan𝔍 for retirement, for tax efficiency, to meet the costs of education, and much more.

Portfolio management in๊volves investing and managing investments to achieve a return with acceptable risk that helps you to rea🅘ch your financial goals.