October 13, 2023

Family Office

Investment Advisor vs Wealth Manager vs Fund Manager

by Sreepriya

The world of private wealth management can be extremely complex, with a multitude of different terms, services, and providers. While multi-family offices and wealth managers can offer critical services to help preserve and grow the wealth of the India’s wealthiest families, the terms are often used interchangeably, leading to confusion among clients about what each actually does and which one is the right one to choose.

Terms such as Investment advisor & Wealth Manager are increasingly being used interchangeably, offering sometimes very distinct and dissimilar services. Hence, it is imperative that readers understand the difference between multi-family offices and wealth managers before making the decision about which is right for them.

Who is a Fund manager?

A fund manager (FM) is responsible for implementing a fund’s investing strategy and managing its portfolio trading activities. Fund management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. The fund can be managed by one person, by two people as co-managers, or by a team of three or more people with expertise. They monitor funds’ portfolios, engage in research, and analysis to understand market sentiments, pick the suitable investments for their clients, and adjust them as needed for maximum profitability.

The investment corpus or the fund value to be managed, must be identified, and allocated to the fund manager to manage, and then the role of the FM starts. The fund manager who acts as a product manager will only invest according to the investment objective of the fund / product which has been registered and approved by a regulator like SEBI. In most cases it revolves around a single asset class and some instances can have multiple asset classes.

It is not necessary for the FM to know what the value of total assets or assets/corpus outside of the funds allocated to this fund. Decisions and action taken by the FM is specific only to the value managed by the FM and may be totally insulated from the corpus outside the fund.

Typically, each fund will carry fund management cost, entry and exit loads. Few fund also come with set up cost and profit sharing etc.

Who is a Wealth Manager?

A Wealth Manager (WM) typically works with high-net-worth individuals, and require minimum threshold of assets to assume management over your various financial instruments and assets.
WM could be an individual or a firm represented by an individual. WM starts with understanding investor profile, setting investment goal and manage the wealth/assets allocated to him/her. Wealth manager may build and manage your accounts and investment portfolio, provide support for periodic reports and investor statements.

In practice, Wealth Managers act more as relationship manager and hence depend on an additional professional expert for advice. Most of the time spent by the WM with investor is mostly to build relationship, which makes it difficult for WM to be on top of the research and analytics required for diligent investment actions. WM in individual capacity acts as Manager or acts as front ending person while representing an institution.

Typical wealth mangers income is earned through the various investment populated in the portfolio, and can vary with size and complexity of the individual instruments.

Who is an Investment Advisor?

An investment advisor (IA) can hold your hand, so to speak, as you make your way through the risky and often confusing investment landscape. They may able to point you in the right direction regarding: How much money you should invest, how much money you put in an emergency fund, recommendations on what investment strategies, approach and move you should take to derive the objective/investment goal. An IA can work with you to create a financial plan and then manage your portfolio of assets to help you hit your goals. Investment advisors are held to the fiduciary standard ie; always putting their clients’ best interests before their own. A True investment advisor will be agnostic of fund manufacturers, and will only look at the investment strategy, keeping the particular investor requirements in mind. He/she will be neutral and non-emotional when it comes to taking the right decision or choice for the investor.

If you’re busy juggling a career, raising a family, and managing other pursuits and commitments, you may not have time to stay on top of trends in the stock market. Working with an investment advisor may help whittle down the time spent to make informed investing moves. Investment advisors can help you with investment management, retirement planning, estate planning, tax preparation/optimisation, budgeting, debt reduction, and so on.

Every advice from IA will be backed by deep research and experience. Often these professionals come with certifications like CFA, CFP etc., or/and with minimum work experience of 10 yrs + in investments industry. There is no minimum threshold or maximum corpus, which an IA can provide advice for. Unlike a wealth manager, advice from an IA will be most suitable and accurate if the overall assets can be considered. This will help the IA to provide asset allocation percentage and portfolio diversification, for the overall portfolio. Another distinction is that IA can have multiple fund managers or wealth managers under the overall advised portfolio. However as mentioned above each WM and FM will be limited to activities allocated to them directly.

Typically the service of IA will be provided as a fixed fee or at a percentage of the assets under advice, however in both the cases the fees is predetermined and agreed with the investor.

Who is a SEBI-Registered Investment Advisor?

In India, any individual or entity that falls under the definition of an Investment Advisor (IA) must register with SEBI. The regulations define an investment advisor as someone who advises about investing in securities or provides research analysis.

SEBI regulates the registration of Investment Advisors (IAs) under the SEBI (Investment Advisers) Regulations, 2013. This includes individuals, partnership firms, LLPs, companies, and any other entity that provides investment advisory services for a fee. Employees and representatives of investment advisory firms who interact with clients and provide advice should also be registered with SEBI.
However, anyone engaged in incidental advice, such as a banker, chartered accountant, or insurance agent, is not required to register as an investment advisor. But, if such a person wishes to provide investment advice as a primary service, they can register with SEBI as an IA.
Mutual fund distributors are no longer allowed to use nomenclature like ‘independent financial advisers’ (IFAs) and ‘wealth managers’ without registering with SEBI as RIA.

Following are some of the regulations that an RIA should comply with.

  • Registration: RIAs must be registered with SEBI and meet minimum qualifications and experience requirements. They must also pass a valid certification examination.
  • Fiduciary duty: RIAs must act in their client’s best interests and provide unbiased advice.
  • Disclosure: RIAs should disclose all information about their investment products and services, including charges.
  • Record-keeping: RIAs must maintain detailed records of all client transactions and interactions.
  • Compliance: RIAs must comply with all SEBI regulations, including advertising and marketing, conflicts of interest, and client confidentiality.

Family Office Model

We at Entrust Family Office, operate on a pure fee based advisory model, completely aligned to our clients with an approach to provide focused holistic family office solutions in a conflict free model. We analyze various investment opportunities without any bias, enabling our client families to achieve their short- and long-term financial milestones.

The administration and preservation of wealth has never been more complex. In addition to the growing complexity within the investment space, UHNIs also must contend with the challenge of navigating new regulations, tax compliance, cyber-crime, and economic volatility. The role of family office investment advisors has become more critical today, thus selecting the right partner for your specific needs is key to success.

More like this

Investment Advisory

Navigating Financial Decisions with Pragmatism and Poise

The intertwining of money and emotion is undeniable, especially in the realm of investment. Successfully navigating this intricate relationship requires deliberate efforts to keep emotions at bay, ensuring sound financial decisions. One effective strategy is automating routine financial transactions, such as postpaid phone bills, insurance premiums,......

by Sreepriya
read more
Investment Advisory

All eggs in one basket ?

Is concentrating all your eggs in one basket the right approach for investment advisory? Absolutely. This strategy involves thorough research, data analysis, and understanding your risk profile, financial goals, and objectives. Similar to sharing all health-related issues with your family physician, your Investment Advisor

by Sreepriya
read more
Family Office

Investment Advisor vs Wealth Manager vs Fund Manager

The world of private wealth management can be extremely complex, with a multitude of different terms, services, and providers. While multi-family offices and wealth managers can offer critical services to help preserve and grow the wealth of the India’s wealthiest families, the terms are often used interchangeably, leading to confusion....

by Sreepriya
read more

signup for updates