What’s the difference between financial planning and portfolio management?


Portfolio management involves choosing investments. Financial planning focuses arranging your affairs to cut your taxes.


When investors are considering hiring us to manage their portfolios through Successful Investor Wealth Management Inc., they sometimes ask about the difference between financial planning and portfolio management.

It’s a good question. Portfolio management involves choosing investments for your portfolio. These selections are based on your investment objectives, risk tolerance, age and personal circumstances. Financial planning, on the other hand, focuses on arranging your affairs to cut your taxes. This can be done through income splitting and various other means.

Financial planning and portfolio management complement one another by helping you estimate how much you need to save, or the investment return you’ll need, to achieve a particular level of income at some future point and adjust your portfolio accordingly to meet this goal.

Use caution when selecting a financial planner

Many mutual fund and insurance salespeople offer their clients free, but often rudimentary financial planning.

The quality of this financial planning varies widely. To get top-quality help, you may need to consult an accountant or a registered financial planner. When you do this, it is important to select a financial planner who only generates income through fees. This way, you avoid conflicts of interest.

Financial-planning fees can range from several hundred to several thousand dollars.

Manage your portfolio successfully into retirement

Relax. You can have clear, simple guidelines on planning and enjoying a successful retirement. You benefit from our experience in the day to day work we do building wealth for our Successful Investor Wealth Management clients. We’ve packed our experience into one comprehensive guide for you—”12 Steps to the Retirement You Want.”


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Start with your tax preparer

Your tax preparer may be able to provide you with financial planning services. They may also be able to refer you to somebody who can.

If you do your own taxes, you can probably do most, if not all, of your own financial planning. Popular Canadian tax software programs include QuickTax from Intuit (http://quicktax.intuit.ca) and Cantax (http://www.cantax.com). Intuit also offers Quicken Home & Business (http://quicken.intuit.ca). This program lets you monitor your personal finances, as well as track the value of your investments and other assets.

It also helps to do some reading. There is no single book or web site that we can recommend on the subject. That’s mainly because individual circumstances vary widely, laws frequently change and books quickly go out of date. You’ll need to browse through several to find one or more that works for you.

The best way to choose a book on this (or any) topic is to use an old encyclopedia buyer’s trick. See what the book says about a question to which you know the answer, and judge the book accordingly.

Trusting your financial advisor

Many of our portfolio clients tell us they chose us to manage their investments because they feel a deep sense of trust in our investment capabilities. Obviously they have confidence in the gains we have achieved, both in our newsletter recommendations and our portfolio management results.

But they also feel an extra sense of trust due to the way we set up the business, to eliminate conflicts of interest, which ensures that our clients get our unbiased recommendations with no fear of hidden costs. This sets us apart from most investment services: you can find out more without any obligation.

If you hire us to manage your investments, we tailor your portfolio to your own unique situation—your specific goals, your temperament, your financial situation. We work for your convenience, not ours.

What do you look for in a financial advisor? Leave us a comment and let us know.


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