Financial Experts Compared: Which One Offers the Best Return on Investment for You?
The American College of Financial Services recently conducted a study titled "Advising Through Uncertainty Study", which highlights key differences between investment managers and financial planners during market volatility.
The study found that financial planners, who offer a complete suite of financial planning and investment services, are more attractive to clients with assets under management more than triple those of investment planners. This is due to the comprehensive nature of financial planning services, which includes areas requiring specialized knowledge such as charitable giving, stock option planning, and complex trust and estate planning.
In contrast, investment managers primarily focus on managing the investment portfolio itself. However, during times of market uncertainty, 45% of investment managers fielded client inquiries compared to 33% of financial planners. Additionally, financial planners received fewer portfolio revision requests, indicating they may better manage client emotions and expectations regarding investments.
The role of designations, such as ChFC®, RICP®, and CAP®, is significant in this context. Financial professionals holding these designations differentiate themselves from non-designated advisers by providing more comprehensive financial planning and achieving better client behavioral outcomes around investments. Only 26% of designees said client focus has centered on investments, versus 37% of non-designees, reinforcing the planners’ broader role.
The study also found statistically significant divergences between clients of the American College of Financial Services designees and non-designees. Clients working with financial planners show less dramatic shifts in feelings and behaviors during and immediately after market shocks compared to clients relying only on investment managers. This means clients of planners tend to be less anxious and reactionary, which is also true for the planners themselves.
The value of a financial planner extends beyond asset growth, encompassing services such as estate planning, income planning, charitable planning, and tax planning. On the other hand, the value of an investment manager is primarily tied to the portfolio and the access to capital markets it brings.
The study suggests that clients of financial professionals with American College of Financial Services designations are less anxious and reactionary. This understanding and acceptance from clients to withstand fluctuating investment performance is a testament to the competence and confidence of these financial professionals.
In essence, financial planners provide holistic financial guidance beyond portfolio management, helping clients navigate uncertainty with less stress and fewer impulsive investment changes. Investment managers, on the other hand, focus narrowly on portfolios and may face more client anxiety and reactive behavior during volatile times.
Research studies consistently find that a broader story, including planning value, resonates with clients. The business case for true comprehensive planning requires not just service offerings, but expertise to back them up. Differentiation comes through competence and confidence for financial professionals, according to the survey.
[1] Source: The American College of Financial Services' Advising Through Uncertainty Study.
- During market volatility, financial planners, who provide a broad spectrum of financial planning services, seem more capable of managing client emotions and expectations, receiving fewer portfolio revision requests as compared to investment managers.
- A high percentage of investment managers (45%) fielded client inquiries during market uncertainty, while financial planners (33%) received fewer, indicating a possible advantage in managing client anxiety during such times.
- Financial professionals holding designations such as ChFC®, RICP®, and CAP® from The American College of Financial Services are found to provide more comprehensive financial planning services and achieve better client behavioral outcomes compared to non-designated advisers, with clients showing less anxiety and reactionary behavior during market shocks.
