What is financial planning and wealth management?
Despite how often people use the terms ‘wealth manager’ and ’financial advisor’ interchangeably, there are several differences between the two. Financial advisors serve the masses, while wealth managers serve a specific clientele: High Net Worth (HNW) and Ultra-High Net Worth (UHNW) individuals.
If you want help managing your finances but aren’t sure which option is the best choice for you, your accounts, and your financial goals, learn more about a wealth manager vs. financial advisor and their differences below.
What is a Wealth Manager?
A wealth manager offers an investment advisory service in addition to other financial services to meet the needs of both HNW (individuals with at least $1 million liquid net worth) and UHNW (individuals with over $30 million liquid net worth) clients.
Wealth managers work very closely with their clients, rolling all of their services into one comprehensive package that meets their unique financial needs.
What is financial planning and wealth management when bundled into one comprehensive service? Wealth managers may provide services such as:
- Financial planning
- Tax services
- Philanthropic planning
- Estate planning
- Legal planning
- Retirement planning
- Investment management
A wealth manager’s goal is to help you preserve and get the most from your money, whatever that looks like to you.
While there are no additional requirements to becoming a wealth manager, Certified Private Wealth Advisor (CPWA) and Certified Financial Planner credentials are something to look out for.
Most wealth management clients will establish either a fee-only arrangement or pay a percentage of their assets under management (AUM). However, some firms will charge additional fees for special products or services the client adds.
When comparing a wealth manager vs. a financial advisor, the main difference is the clientele. Most wealth managers will only accept clients above a particular net worth. Some only require $250,000 in an account, while others may require a minimum of $1 million, $10 million, or more.
Financial advisors, on the other hand, are available to anyone, regardless of net worth.
What is a Financial Advisor?
A financial advisor is a professional trained to help his or her clients make decisions about what to do with their money. They use their expertise to create personalized financial solutions and plans to help each client achieve their financial goals.
A financial advisor’s plans can include:
- Tax strategies
- Debt management
- Charitable planning
- Emergency funds planning
You’ll notice that many of these services are similar to those offered by wealth managers, but financial advisors offer them on a smaller scale.
The term “financial advisor” is broad. It doesn’t refer to one particular kind of advisor, and there are several distinct types within this category. Some financial advisors are certified public accountants (CPAs), specializing in accounting and taxes, while others are chartered life underwriters (CLUs), whose expertise is in estate planning and life insurance.
Some financial advisors specialize in advising the finances of a specific type of client, like entrepreneurs, lottery winners, professional athletes, or government employees. Others simply go by the title “financial advisor” and offer comprehensive services that can be customized on a case-by-case basis.
Due to the broad nature of the term “financial advisor,” credentials required for this field will differ, however, most financial planners or advisors are at least Certified Financial Planners. They may tack on additional credentials, as mentioned above.
The most notable difference between a wealth manager vs. a financial advisor, again, is the clientele. While wealth managers exclusively work with high net worth individuals, financial advisors will work with clients at all income levels. Their main goal is to create strategies on behalf of their clients that will both reduce financial risks and build their wealth over time, regardless of the starting amount.
Is a Wealth Manager or Financial Advisor the Right Fit For Me?
The answer to the question of choosing a wealth manager vs. a financial advisor is found only after analyzing your net worth and revisiting your financial goals.
Is your net worth over $1 million?
If so, you are HNW and should consider a wealth manager if you want comprehensive financial management from someone experienced in managing this kind of extraordinary wealth. If your net worth is above $30 million, you qualify as a UHNW investor, which is all the more reason to use a wealth manager.
Is your net worth under $1 million?
While some wealth management firms will accept clients with as little as $250,000 in liquid assets, most individuals with a net worth below $1 million choose to work with a financial advisor.
Pros and Cons of Each
Someone may choose a wealth manager over a financial advisor due to their niche financial knowledge or their bundled services, while another individual may choose a financial advisor over a wealth manager because they can help them grow their wealth from a lower starting point with specialized services.
Here are the pros and cons of using a wealth manager vs. a financial advisor:
- Strong financial knowledge of HNW and UHNW circumstances
- Provide comprehensive financial management
- Unavailable to those with a lower net worth
- Grow your wealth regardless of starting point
- Specialize in certain financial services
- Limited in HNW and UHNW knowledge and experience
How to Find Your Dream Wealth Manager (or Management Team)
1. Do your research.
Before you consider a wealth manager or wealth management team, confirm that they do not have any disciplinary actions against them and are in good standing with their regulatory agency using the Financial Industry Regulatory Authority’s Broker Check or the Securities and Exchange Commission’s Investment Adviser Public Disclosure website.
While you’re doing research, look at their history of success by checking out any reviews and testimonials. You’ll get a feel for the kind of results they’ve been able to produce and the client experience you can expect if you work with them.
2. Ask about rates.
Don’t be shy—ask about rates. Advisors are not required to offer a written contract to clients for their services, so it’s important to ask about rates and the advisor’s responsibilities up-front to avoid unwelcome surprises down the road.
They may work on a fee-only basis (paid directly by clients only for their services), use a fee-based payment structure (paid by clients but also earned through commissions), or charge a percentage of the assets under management (AUM).
3. Understand their philosophy.
At the heart of successful investing and wealth management is an investment philosophy. Some of the most common of these are contrarian, opportunistic, evidence-based, and passive investing philosophies. Ask questions about any potential wealth manager’s investment philosophy before signing a contract to ensure it matches your personality, risk tolerance, and return goals.
4. Choose someone who prefers long-term relationships with clients.
A good wealth manager should understand that both your finances and life will change over time, so they should have a long-term strategy as well as immediate ideas. They should be able to walk you through every step of the way, from your first meeting when you’re still asking ”What is financial planning and wealth management?” to progress meetings at least once per year to review performance and strategize on next moves.
Wealth Manager vs. Financial Advisor: Financial Management for Everyone
While all wealth managers are financial advisors, not all financial advisors are wealth managers. Wealth management typically serves clients with a liquid net worth of $1 million or more, while financial advisors cover a broad spectrum of services available to all. This distinction can help you determine how your assets are best managed and lead you to the best fit to grow your wealth regardless of your starting point.
For HNW and UHNW investors, choosing the right wealth manager is the key to preserving and growing your wealth. Weber Global Management has a track record of success in managing this kind of sizable wealth through customized financial plans utilizing our global resources and decades of niche experience. To learn more about the comprehensive wealth management services we offer to HNW and UHNW individuals and families, reach out to our team here.