Investment Advisory v/s Financial Planner - Know The Difference
3 Minutes
September 25, 2023
As a High-Net-Worth Individual (HNI), you may find yourself in a dilemma when it comes to seeking the correct guidance to preserve and grow your assets. Two primary options in this vertical are financial planners and investment advisors, each providing a distinct set of services customised to your unique needs. Let’s delve deep into financial planning and investment advisory to understand what they are and their differences.
What is financial planning and investment advisory?
An investment advisory service primarily focuses on managing and optimising a client's
investment portfolio. In India, registered investment advisors are governed by the
Securities and Exchange Board of India (SEBI) and its regulations, ensuring a structured
approach to wealth management. These experts analyse market trends, perform risk
evaluations, and suggest investment strategies aligned with your financial goals. They are
experts in understanding the complications of financial markets and their movement to
enhance returns on investments.
In contrast, financial planners’ approach is holistic and is based on your financial
needs and preferences. This includes not just investments but even insurance, tax planning
and evaluation, estate planning, and retirement planning. Financial planners collaborate
with you to prepare a prudent roadmap that matches your long-term aspirations.
Distinction between financial planners and investment advisors
Framework
Certified financial planners’ regulatory adherence emphasises a client-centric and holistic approach to financial planning. Such planners uphold
the best standards of ethics and professionalism within the domain of financial planning.
Investment advisors function as per the regulatory framework established by
the SEBI. This regulatory oversight ensures that investment advisors adhere to transparent
practices and stay accountable to you. The emphasis is on maintaining the integrity of
financial transactions and fostering a trustworthy environment.
Scope of services
Financial planners extend their services across a broader spectrum. Beyond investments, they
delve into verticals such as estate management, tax planning, and more. The scope of a
financial planner's expertise consists of a comprehensive view of your financial landscape,
ensuring a well-rounded approach to wealth management.
Investment advisors specialise in the meticulous management of investments and providing
valuable market insights. Their primary focus is on crafting and executing strategies that
maximise returns within your risk tolerance level. Their expertise lies in understanding the
dynamic landscape of financial markets and their services are primarily centred around
optimising investment portfolios.
Goal orientation
Financial planners prioritise the attainment of your life goals. Beyond the monetary gains,
financial planners consider factors such as legacy building, retirement planning, real
estate planning, etc. Their goal orientation extends beyond immediate financial returns to
encompass the broader aspects of your life and aspirations.
The core goal of investment advisors' centres around optimising returns on investments while
operating within the risk tolerance level outlined by you. Their expertise lies in strategic
investment management and planning, aiming to attain
the highest possible returns based on market scenarios and your financial
objectives.
Client engagement
Financial planners adopt a more enduring approach to client engagement. They cultivate
ongoing relationships and conduct regular reviews and adjustments to financial plans as
circumstances evolve. This sustained engagement allows financial planners to focus on
strategies as per changing life situations and financial goals.
Investment advisors often engage in transaction-based interactions, executing trades and
actively managing investment portfolios. Their focus is on timely and effective execution
within the parameters defined by you.
Ending note
As an HNI, you stand to gain significantly by discerning the subtle yet impactful differences between investment advisory and financial planning. While investment advisors specialise in understanding the volatility in financial markets, financial planners act as architects, constructing a sturdy financial base that extends beyond mere investment portfolios. As an HNI, you would benefit from seeking the services of an expert financial planner that provides the whole range of wealth management services, including investment advisory.
This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
