Fund Managers vs. Financial Planners


Most people tend to invest in a mutual fund because they are of the opinion that it is less risky than other investments. However, if the fund performs badly, the entire blame falls on the fund manager. Investors then tend to feel that the fund manager did not do enough to protect their investments and should have done a better job.  However, it must be understood that fund managers cannot defend you from external risks. What you may be expecting from a fund manager is actually the job of a financial planner. We need to understand that a fund manager and a financial planner play different roles in the investment world.

Who are they?

A financial planner is one who conducts a detailed research of the market, calculates the outcome and risks and then gives you an idea about which mutual fund you should invest in or how much you should invest in the fund.

On the other hand, a fund manager implements the investment strategies for the fund and then tries to protect the portfolio. They get a higher fee to manage your trading activities. If your investment planning is flawed, the planner is the one to be blamed and not the fund manager.

For eg., if you are unwilling to take exposure to risky investments, but your planner advises you to invest in a mutual fund that has high exposure to equities, your gains and losses can get magnified. This is because equities by nature are risky investments, and if the market sees a selloff, you will lose money. Thus, it is the job of the planner, and not the fund manager, to advise you to park your money in investment instruments best suited to your needs and risk appetite.

Scope of work

A financial planner should give you a thorough idea about the expected performance of different asset classes. He is the one who advices you on how much to invest in a fund and when to exit it.

A fund manager, however, conducts research on the companies and sectors where the fund should invest the money. He decides when and where to invest. So, it is clear that a planner’s main goal is to advice you on the best suited investment avenues, while a fund manager’s main goal is to ensure the fund makes maximum returns on the investment.    

Why the confusion?

The main reason behind this confusion is the demand of the investors. They expect to receive huge returns from the fund they have invested in assuming that the fund manager has advised them on the fund. When a particular investment sector slides and investors make losses, they blame the fund manager and conveniently forget that they may have invested in the fund on the advice of a financial planner. Thus, we need to first understand the difference between the functions of the two and then have realistic expectations from both of them.



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