While the terms "wealth manager" and "financial advisor" may be grouped together or used interchangeably, the two professions actually have quite a few significant differences. Individuals looking for assistance in their financial planning should be familiar with these differences to find the best professional help for them and their financial situation.
What is the Difference Between a Wealth Manager and a Financial Advisor?
In simple terms, the difference between a financial advisor and a wealth manager lies in the clients and the forms of wealth they manage.
Financial advisors manage the financial situation of a client. Wealth managers are a type of financial advisor often associated with clients with a high net worth. Both professionals manage and assist with financial planning, but wealth managers typically specialize in assisting clients with large amounts of wealth.
Let's explore these definitions to learn which would be ideal for your financial needs.
What is a Financial Advisor?
Financial advisors assess and manage the financial status of their clients as well as help them reach their financial goals. Financial advisors manage several aspects of a client's financial situation, ranging from retirement planning, savings, investing and estate planning.
A financial advisor provides a broad group of services, encompassing most client needs. A financial advisor also has a broader range of clientele compared to a wealth manager. While wealth managers work almost exclusively with high-net-worth clients, financial advisors have a wider range of clients.
Most wealth managers have a minimum net worth amount required to begin an engagement, whereas financial advisors typically do not set a barrier to entry. Individual firms will have criteria by which they determine the suitability of the relationship based on complexity, assets, and expertise.
There are different types of financial advisors who serve a variety of client needs. A Certified Financial Planner (CFP) will work with clients to craft portfolios and future financial planning - this is often focused primarily on retirement planning. A certified public accountant (CPA) may be a part of a financial advisory team to aid in tax planning (consulting) and preparation (compliance), or clients may choose to have a separate CPA relationship.
Although there are different types of financial advisors, with specific expertise and areas of interest, here are some of the overarching services a financial advisor may provide:
- Developing a financial plan
- Savings allocations
- Retirement planning
- Tax planning
- Inheritance and Trust creation
- College funding
- Business exit or succession planning
Wealth managers are a subgroup of financial advisors, so they provide more specific advice and services. When looking to Liberate Your Wealth®, understanding what each professional provides will save you time and money when choosing the right partnership.
A wealth manager typically works with high-net-worth clients and provides a personal, deeper level of financial management. A High Net Worth Individual (HNWI) falls into the range of a net worth of $1 million or more of liquid investable assets. Their clients’ asset threshold is one of the biggest differentiators between wealth managers and financial advisors. Wealth managers are typically employed by banks, private firms, and brokerages to work with high- net-worth clients.
Since wealth managers mostly work with high-net-worth individuals, they are more hands-on with a family’s or individual wealth. Some of the services that would fall under the wealth manager’s role include:
- Investment management
- Estate planning
- Risk management
- Capital gains planning
- Philanthropic gifting
- Legacy planningTax planning
- Real Estate transaction planning
Do You Need a Financial Advisor or a Wealth Manager?
Consider Minimum Asset Requirements
When choosing between these two forms of financial professional help, individuals should consider minimum asset requirements to open an account. Wealth management firms may require a minimum of $250,000 while others require $1 million or even $10 million just to open an account.
While every wealth manager may not require large minimum asset requirements, most might. Individuals who can't or do not want to comply with these requirements may fit better with a financial advisor.
Do You Want a Hands-on Approach?
Wealth managers typically have a more hands-on approach than financial advisors. If you prefer to simply check in a few times per year, consider a financial advisor instead of a wealth manager.
Contact Centura Wealth Advisory today to find the financial professional who will help you achieve your financial goals.
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