Finance has a reputation for being complicated and confusing. And like many industries, finance has its own vocabulary, acronyms, strategies, and dialect. It can be overwhelming if you don't live in it every day.
There are two terms — investment management and financial planning — you've probably heard that are sometimes used interchangeably but are actually different. It's one of the areas of question and confusion our firm hears most from clients.
Let's dive into some of the similarities and differences between the two disciplines.
Investment management primarily focuses on managing investment portfolios to achieve financial goals. It involves selecting appropriate investment vehicles, like stocks, bonds, mutual funds, and alternative investments, and making decisions regarding asset allocation, diversification, and risk management.
Financial planning is a broader process that encompasses various aspects of personal finance beyond investments. It involves gathering pertinent information and analyzing an individual's or household's overall financial situation, including — but not necessarily limited to — expenses, assets, liabilities, taxes, insurance needs, retirement planning, and estate planning.
Financial planning aims to create a comprehensive roadmap that aligns our financial choices with our goals and priorities.
The two disciplines definitely overlap, but there are also material differences. So often, the advertisements and messaging you see online or on TV relate to investment management rather than financial planning.
While investment management primarily focuses on managing investment portfolios, financial planning takes a broader approach, addressing all aspects of an individual's or household's financial life to help them achieve their financial goals and objectives. While distinct, both disciplines are often intertwined, with investment management being a vital component of the larger-scope financial planning process.
Spaugh Dameron Tenny is here to support you as you work to achieve your financial planning goals. Connect with one of our financial planners to learn about our financial planning process and investment philosophy.
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Shane Tenny is the managing partner of Spaugh Dameron Tenny. Along with hosting the Prosperous Doc® podcast, Shane has a true passion for behavioral finance, helping clients and audiences understand how to develop successful strategies based on their unique temperaments. An accomplished and highly engaging speaker, Shane is regularly interviewed for television and podcasts, is actively involved in the Financial Planning Association®, and contributes to industry advisory boards.
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