Understanding Financial Planning Vs Wealth Management

Financial planners, wealth managers and discretionary fund managers may have basic similarities, but there are distinct differences between the three and the role they play in managing your portfolio.  

While you can follow a DIY approach to your financial planning, having a trusted professional with a solid understanding of the legal, financial and administrative intricacies can save you a lot of time and money and help keep you focused on your objectives. So, who should you be using and why? 

What is a financial advisor? 

 “Financial planning, typically, is assisting clients plan their current finances. This includes looking at budgeting, understanding debt to income ratios and planning for continuity of income at retirement or death,” explains Scott Bell, Carrick General Manager. Using their expertise and knowledge, they will do a analysis of your current financial circumstances and establish your short, medium and long-term needs and goals. Once they have this picture they design an investment strategy taking into account your objectives, risk attitude and lifestyle requirements. The portfolio will usually encompass investments, insurance and tax strategies. With regular check-ins, they are able to re-evaluate your portfolio and advise on any changes, which can then be implemented with your approval. They are, in essence, your financial planning partner.   

What is a wealth manager? 

“Wealth management is the mobilisation of a client’s assets to achieve true wealth,” says Bell. “In addition to the financial planning functions, wealth management will look at different asset classes, tax efficient structures and the inter-generational transfer of wealth in the most appropriate manner. Further to this, it is structuring a client’s portfolio in a manner that enhances geographical diversification, creates multiple income streams in “hard currency” and is protected.” 

Most financial advisors work with clientele of any income level, while wealth managers target high-net-worth and ultra-high-net-worth individuals. They offer advice in the areas of investment management tax planning, estate planning, risk mitigation, insurance, charitable giving strategies and can usually also offer specialised advice around trusts, tax and accounting. 

What is a discretionary fund manager (DFM)? 

“A DFM is an advisory firm’s best view,” says Bell, “and is designed to assist advisors in making appropriate investment decisions, thereby enhancing their clients outcomes.” The relationship between your financial advisor and DFM should be like a partnership, each focusing on their respective strengths: the advisor determines your investment needs and the DFM executes the plan. Both have a responsibility to ensure the solutions are right for you. “Typically a DFM will partner with an advisory firm, who set the parameters. In regular consultation the DFM provider and advisory firm will make changes to the underlying funds, where required, and look at making tactical asset allocation decisions based on macro-economic indicators,” explains Bell. “These decisions are informed by the research capabilities and IP of the DFM and endorsed or rejected by the advisory firm. By partnering with a DFM advisors are able to focus on their core function, building trusting relationships with their clients and providing advice.” 

What do you need? 

The type of financial professional you need depends on your unique situation. “We believe everyone should have access to high-quality financial planning,” says Carrick CEO Craig Featherby. “Carrick has always put the client first. That means recognising and focusing on our core strengths, namely financial planning and wealth management, ongoing communication, monitoring of a client’s plan and personal circumstances, and building relationships with those who have the expertise and wherewithal to ensure our client’s portfolios grow in line with expectations.” 

Carrick’s Private Wealth Managers are there to guide high net worth or ultra-high net worth clients to grow and secure their wealth. Carrick also has key partnerships with selected DFMs. “Recommending and agreeing to appoint a DFM enables the Private Wealth Manager to focus on their priorities, leaving the DFM to exercise professional discretion in building and managing a portfolio of investments on the client’s behalf and according to the client’s risk profile,” explains Featherby. The selected DFMs are experienced professionals who monitor the markets on a daily basis and make the necessary strategic and tactical allocation decisions. They operate globally in multiple jurisdictions and are judged on their consistent track record backed by robust administrative and operational structures. 

“One of the three pillars of Carrick’s business philosophy is transparency, along with integrity and professionalism,” said Featherby. “We demand, and see to it, that regulatory and compliance standards are met by all our advisors, Private Wealth Managers and DFMs.” 

Considering the current challenging times, strategic financial partnerships, such as that of an agile discretionary fund manager and a Private Wealth Managers is more important than ever.