Financial planning, investment management, and tax planning can be complex topics, and many feel unsure about where to seek help.
To complicate things further, many overlapping terms are used to describe financial professionals, like “financial planner,” “financial advisor,” “wealth manager,” “financial coach,” and more.
This blog post will compare and contrast two types of professionals who can assist with financial planning: financial advisors and wealth managers. We’ll explore the key differences between these two types so you can decide which is right for you.
What does a financial advisor do?
Financial advisor is generally used to describe a professional who advises individuals or families on financial planning services, including investment planning, retirement planning, taxes, insurance policies, estate planning, and other related topics. They often possess the knowledge to create plans tailored to each client’s goals and circumstances.
It’s a broad term that can include a wide range of qualified and unqualified individuals. That’s because, unlike other professions like law or medicine, there are no specific education, certification, or experience requirements to market one as a financial advisor. This means anyone can hang a shingle as a financial advisor without prior experience.
To help illustrate this point, consider two individuals—one we will call Kyle, and the other, Jenna.
Kyle is 22 years old and recently graduated college. He’s just landed his first job with a financial services company that sells insurance and is learning the ins and outs of selling whole and variable life insurance. For every policy Kyle sells, he receives a commission from his employer.
Kyle is new but eager to learn and is focused on booking as many consultations with prospective clients as possible. As part of that process, he contacts his friends and family to see if anyone needs life insurance. Although Kyle’s experience and scope of services are limited, he holds himself out as a financial advisor when contacting prospective clients.
Alternatively, Jenna has been in the industry for two decades and recently started her own independent financial planning practice last year. She primarily works with women in tech and advises them on various topics, from investments to equity compensation and in-depth tax planning.
Jenna is a CFP® professional and charges a flat annual fee for her services. Jenna also describes herself as a financial advisor when marketing to prospective clients.
While it’s clear that Kyle and Jenna have different levels of expertise and offer vastly different services, they both market themselves as financial advisors. And that’s one of the most important aspects to understand about the term financial advisor: it’s very broad and can include a wide range of qualified and unqualified individuals.
What does a wealth manager do?
A wealth manager is a person or team of financial advisors who offer investment management, estate planning, tax strategies, and retirement planning advice to high-net-worth families and individuals. In addition, they work with clients to develop long-term plans to manage their investments and help them achieve their financial goals.
Practically speaking, wealth managers are a subset of financial advisors with a more defined service offering and clientele. If the term “financial advisor” is a large circle encompassing various services, wealth managers would be a smaller circle nested inside the financial advisor circle.
Generally, a certain asset level or income qualifies for wealth management services. While asset minimums vary by wealth manager, many start at $500,000. That’s because many wealth managers offer comprehensive financial planning and charge fees directly from the client’s investment portfolios. So, to cover the cost of all their services, their clients must have a certain level of assets or income.
To continue with our previous example, imagine another financial professional named Ted.
Ted has been in the industry for nearly 30 years and markets himself as a wealth manager. Ted primarily works with physicians and surgeons in their 50s who experience burnout and want to retire early.
He helps his clients navigate the standard aspects of financial planning, like investments, taxes, and estate planning. But, he also takes it a step further by helping his clients structure physician’s groups, negotiate compensation packages, establish retirement plans, and analyze commercial real estate deals.
Ted also communicates directly with his clients’ other financial professionals, such as their CPA or attorney, when needed. Ted directly manages his clients’ portfolios and requires an asset minimum of $500,000. Ted’s clients feel secure knowing he has analyzed and planned every aspect of their financial situation.
Ultimately, wealth managers are a subset of financial advisors who typically work with high-net-worth or high-income individuals and offer comprehensive financial planning to their clientele.
Which professional is right for you?
There are some critical things to consider when deciding which type of financial professional is right for you.
What scope of services are you looking for?
Generally, you can find a financial advisor who will offer any scope of service you’re looking for. For example, some financial advisors like Kyle will focus on a single aspect of your financial situation.
Alternatively, some wealth managers are more geared towards comprehensive financial planning and will help you understand how each area of your finances will impact the next and create a cohesive financial plan to get you the best outcome overall.
How much do you have to invest?
While most wealth managers will have an investment minimum for their services, some will not. So, if you’re a high-net-worth individual looking for comprehensive financial planning, it may be best to seek out a wealth manager.
Alternatively, if you don’t meet most wealth managers’ investment minimums, you may seek a financial advisor who will work with you regardless of asset level.
Are you looking for a long or short-term engagement?
Lastly, many wealth managers offer their services on an ongoing basis, as many of the strategies they utilize will span years or even decades. Alternatively, you can find financial advisors willing to engage in one-time or project plans as needed.
Tencap Wealth Coaching is here to help
If you want to work with a wealth manager to build and secure your financial success for decades to come, Tencap Wealth Coaching is here to help.
At Tencap Wealth Coaching, we’re focused on helping you achieve your financial goals and more through academically sound financial planning. From investment management to retirement planning and tax strategies, we are here to manage the complexities of your money and allow you to relax and enjoy life. Learn more or schedule an introductory meeting below.
Nick trains and develops families in creating, maintaining, and growing wealth. This includes educating clients on the science and academics of investing, comprehensive financial planning, and ongoing coaching to ensure discipline for a lifetime. Nick has seen this create incredible levels of freedom, fulfillment, and love for the families he works with.