Broker Check

Can Investment Management Without Financial Planning Ever Be Fiduciary?

Investment Management vs. Financial Advice

Introduction + Executive Summary 

"The sheer amount of data and computing power available has completely leveled the playing field in many ways between the pros and amateurs. And there is an abundance of investment books, blogs, analysis and opinions from intelligent, thoughtful people if you know where to look.

I wish I could say the same thing for financial advice, but I don’t think this side of the equation has kept up over the years. A large majority of what the financial industry calls financial advice is really just glorified product sales.

And as portfolio management functions continue to see further technological gains in the future the basics will become more and more of a commodity, so financial advice will be a huge differentiator in the financial services industry. Anyone can create a portfolio, asset allocation or investment strategy. What most people actually need is advice about how their investments fit into their overall financial plan, and more importantly their life."

--Ben Carlson  ... Investment Management vs. Financial Advice

More from Bruce on this topic ... To get the most out of professional investment management you really need to also be receiving competent and fiduciary-level financial advice. Investment management and financial planning go hand-in-hand. Professional, fiduciary-level investment recommendations can actually only exist in the context of understanding the clients' complete financial situation, including their values,  data and documents.

Professional and ethical surgeons typically enjoy doing their surgical specialty.  But they will only accept a surgical "candidate" for surgery once the patient's complete medical situation has been vetted by appropriate medical professionals.  A professional and ethical investment manager is no different and will require a similar complete financial "vetting" by appropriate financial professional(s.)


Investment Management vs. Financial Advice

Investment Management includes ...

Financial Advice includes ...

Asset allocation, expected returns, risk tolerance and time horizons.

Counseling clients on their complete financial situation

Portfolio construction & risk management

Comprehensive financial planning incorporating emotional / behavioral / values advice

Measuring portfolio performance vs agreed-upon benchmarks

Assessing client results (individually) vs client goals

Putting your money to work to help reach your financial goals

Helping clients understand & refine their values, goals, dreams, desires and fears.

Creating a process that guides your actions in a wide variety of market environments.

Designing and implementing a plan, then making adjustments to the plan along the way as life, market or economic forces intervene.

Designing a portfolio that can survive severe market disruptions.

Making a financial plan that can survive severe life disruptions.

Growing and/or preserving your investments.

Understanding why money is important to you and your loved ones

Creating rules of thumb to guide your actions under economic and market uncertainty.

Helping people make better decisions with their money under “life uncertainty” that might be impossible to reduce.

Helping you understand how much you need to earn on your investments to meet your future spending needs.

Helping you understand how much you need to saveto meet your future spending needs.

Helping you figure out which “bucket” to take your money from when you need to spend it.

Helping you figure out where to spend your money in a way that makes you happy.

Helping you grow your savings to meet future consumption needs.

Helping you plan and budget for future consumption needs.

Creating and using a long-term process to guide your investment decisions.

Creating systems that allow you to spend less time worrying about your money.

Reducing the anxiety that comes from the volatile nature of the markets.

Reducing the anxiety that comes from making important decisions with your money.

Growing your financial resources so you will be able to live on them happily without requiring you to work for any needed income.

Figuring out what will be important to you when you have enough income from your own resources that you no longer need to work.

I am a big fan of specialists when a specialist can accomplish something for you that simply can not be accomplished by the non-specialist (e.g. brain surgery!) or when the specialist has a much higher probability of providing an acceptable or even superior result.

Whenever I see my Primary Care Doc, the receptionist always hands me a form to complete including what supplements I'm taking.

Many of us, often for various useful reasons but sometimes not, have our financial lives spread out in different places, entities, providers, etc. As a Certified Financial PlannerTM Professional (CFP® ) this situation makes me a little crazy, even though I know it is reality.

My answer to my title question is a resounding "No."  You may be receiving ongoing professional investment management from an entity or individual who is "playing by our (current) rules" so s/he can legally say s/he is following the Fiduciary Standard.  But if that entity / individual is not up to date on your taxes, insurances, employer retirement plans ... as well as other matters that might significantly impact your financial life (expected inheritance, need to support extended family, health conditions of yourselves and Loved Ones) ... then in my professional view you are not receiving Fiduciary Financial Advice, even though the Investment Management you receive might be world-class!