What Is the Difference Between a Portfolio Manager and a Financial Advisor?
Investors rarely have enough time to manage their own portfolios themselves. Portfolios have a variety of stocks and mutual funds that change throughout the trading day and sometimes require immediate action for aggressive investors or long-term decisions for more careful investors. Just as investors cannot watch the market constantly to make these decisions, other investors may not have the financial knowledge to make these choices by themselves. Both money managers in charge of portfolios and financial advisors help with these decisions and investor planning.
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Financial Advisors
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Financial advisors help individual investors make important decisions regarding their investments. This does not necessarily mean they help people invest in securities. Many times financial advisors simply help people realize their financial goals, choosing accounts to keep money in, and create budgets that allow them to plan for the future. Individuals have plans regarding their retirement and ideal returns on their investments, but may not understand the ins and outs of financial management. Advisors help by explaining the more complicated aspects of the financial processes. Many advisors work for banks or are offered as an employee benefit.
Portfolio Managers
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Portfolio managers tend to take a more direct role in financial management than advisors, and are geared more toward investors who understand their investments and the direction they want to take them, but do not have time to directly manage their own portfolios. Managers help by explaining certain actions of the stock market, advising on what securities to buy for long-term strategies, and make these purchases as directed by the investor -- for a fee. Some managers are autonomous and have the ability to make many decisions regarding the portfolio, while others only act on direct instructions.
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Overlap
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There is significant overlap between financial advisors and portfolio managers. Investment organizations may use the terms interchangeably. In the end, portfolio managers often explain and advise investors on a variety of financial matters like advisors, and advisors often recommend stable stocks and help facilitate transactions in the same way that managers do.
Financial Analysts
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Financial analysts occupy a third position which is closely related to financial advisor duties, but with some key differences. Analysts use programs to carefully research investments and returns on different financial decisions. While advisors may do the same thing, analysts are more specialized and do not deal with individual explanations to consumers as often. Analysts are more often employed by businesses and other organizations to help them realize their financial goals.
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