Advice Only Financial Planning versus Investment Managment

Not all financial professionals are created equal. Understanding the difference between advice-only planners and investment management is critical to choosing the right fit for your needs. Here’s a breakdown:

• Focus

  -Advice-Only Financial Planner: Offers comprehensive, unbiased advice on all areas of personal finance, including budgeting, retirement planning, tax strategies, debt management, and estate planning. They provide a plan based on the whole picture.

  -Investment Manager: Primarily focuses on managing investment portfolios, aiming to grow your assets through equties, bonds, and fund selection.

• Sales vs. Advice

  -Advice-Only Financial Plans: There is no selling of financial products or earning commissions. The advice is independent and aligned solely with your best interests.You pay for the plan

  -Investment Manager: May sell financial products like mutual funds, potentially earning commissions or management fees from these products.

• Cost Structure

  -Advice-Only Financial Planner: Charges flat or hourly fees, or fees for a comprehensive plan. Costs are transparent and tied to the time and expertise provided.

  -Investment Manager: Typically charges a percentage of assets under management (AUM).

• Comprehensive Planning

  -Advice-Only Financial Planner: Looks at your entire financial picture, including non-investment-related goals like paying off debt, buying a home, or saving for a child’s education.

  -Investment Management: Primarily focuses on investments and might not offer advice on broader financial topics.

• Tax Efficiency

  -Advice-Only Financial Planner: Provides guidance on tax-efficient savings, withdrawals, and estate planning, potentially helping you reduce your lifetime tax burden.

  -Investment Management: May optimize your portfolio for tax efficiency but typically focuses on tax consequences of investments rather than broader tax strategies.

• Product Recommendations

  -Advice-Only Financial Planner: Recommends strategies that are not tied to specific products or providers.

  -Investment Manager: Often recommends products they manage or sell, which can create bias especially if there are differences in compensation or paperwork. IE.Seg fund vs Mutual fund

• Flexibility and Accessibility

  -Advice-Only Financial Planner: Commonly works with clients of all income levels, not requiring a minimum level of investable assets.

  -Investment Managent: Often has minimum asset thresholds (e.g., $500,000 or more) and can cater primarily to wealthier clients.

• Behavioral Coaching

  -Advice-Only Financial Planner: Acts as a coach, helping you navigate emotions around money and build better financial habits across all areas of your life.

  -Investment Management: Focuses on managing investment behavior, such as staying invested during market volatility, but may not provide broader financial behavioral guidance.

• Alignment with Goals

  -Advice-Only Financial Planner: Helps align your financial strategies with your goals, whether it’s early retirement, supporting parents and children, buying a vacation property, or leaving money to the next generation.

  -Investment Management: Aligns your investment strategy with your risk tolerance and growth objectives but may not address non-investment-related goals.

Investment management and financial planning are related but not the same. It is best to have someone in your corner who is looking at the whole picture. Most middle-income Canadians in their 40’s would gain clarity and confidence from having an Advice only financial plan.

*ChatGPT may have been used in developing this article