Do you know the difference? Read on to discover exactly how these two service providers differ.
Maybe you’ve heard the terms wealth manager and financial advisor around the workplace, on TV commercials, or on LinkedIn.
You might wonder: Are they interchangeable? Or are we talking about two completely different services? And how do I know if I need one or the other?
You’re not alone in these questions—after all, they sound very similar.
So What’s the Difference Between Financial Advisors and Wealth Managers?
The short answer is wealth managers are a subgroup of financial advisors.
Wealth managers typically help individuals who have substantial assets and don’t know how best to manage them. Most individuals don’t need to consider a wealth manager until they have at least a few hundred thousand dollars in assets.
How Do Wealth Managers Help?
A wealth manager is a financial advisor who offers a more specialized level of service, typically to individuals with considerable assets. They help their clients grow, protect, and manage their wealth.
Even though wealth managers are a subset of financial advisors, wealth managers handle quite a few different facets of your overall financial health.
Financial Planning: Cover the Basics
One of the primary tasks of a wealth manager is to create a comprehensive financial plan tailored to the client’s goals, risk tolerance, and financial situation. This plan encompasses various aspects of a person’s financial life, including retirement planning, tax strategies, estate planning, and investment management. Essentially, they aim to provide a roadmap for your financial success.
Investment Management: Turn Wealth into More Wealth
Like most financial advisors, wealth managers also design investment portfolios that align with your financial objectives and risk tolerance. Unlike standard financial advisors, however, wealth managers are known to employ a broader range of investment strategies, including alternative investments like private equity or hedge funds.
Tax Optimization: Be a Smart Tax Payer
Wealth managers are skilled in tax planning, aiming to minimize the tax impact on your wealth. This can involve strategies like tax-efficient investments, capital gains planning, and charitable giving. They’ll work closely with tax professionals to ensure your tax liabilities are optimized.
Estate Planning: Protect Family and Loved Ones
For individuals with substantial wealth, estate planning is critical. Estate planning involves the intended distribution of your wealth after you die. Wealth managers can assist in structuring your estate to pass assets to heirs efficiently while minimizing estate taxes. This can involve setting up trusts, wills, and other legal mechanisms.
Wealth Managers Offer Specialized Services
Compared to financial advisors at large, wealth managers tend to be more involved in the nuts and bolts of their clients’ financial situation. Wealth managers continuously monitor your investments and overall financial plan.
This level of personalization often involves regular check-ins and quick adjustments to your financial plan as circumstances change. This is partially why wealth managers are normally a more costly option and tend to cater to those with substantial assets.
Benefits of a General Financial Advisor
A financial advisor offers many of the same services, but they are less client-specific. They’re trained to serve a wide range of clients to help them manage their finances.
Financial Advisors Have a Broader Client Base
Financial advisors often work with a more diverse client base, which often includes people with varying income levels and assets. They cater to a wider audience, from individuals just starting to save to those with moderate wealth.
Financial advisors are generally more accessible and cost-effective for individuals who may not have the substantial assets required to engage a wealth manager. They can be a great choice for people seeking basic financial guidance and investment support.
Financial Advisors Are Adept at Most Financial Situations
Financial advisors are well suited to assist individuals with relatively straightforward financial situations. They help clients set up and manage basic investment accounts, create budgets, and offer guidance on retirement planning.
While they provide valuable advice, they typically do not handle the complexities associated with substantial wealth.
Financial Advisors Offer Basic Investment Recommendations
Financial advisors primarily focus on offering investment advice and managing investment portfolios. They may recommend stocks, bonds, mutual funds, and other traditional investments, whereas wealth managers often have access to a wider range of investment options, including alternative investments and private equity.
Regulations and Qualifications of a Financial Advisor
Financial advisors may have different licensing and qualification requirements than wealth managers. They are often registered representatives of broker-dealer firms and can offer a broader range of financial products.
Which Should You Hire, a Wealth Manager or a Financial Advisor?
Financial advisors are ideal for those with simpler financial situations, offering basic financial guidance and investment advice.
In contrast, wealth managers are tailored to individuals with sizable assets and complex financial goals, providing specialized, personalized services.
While wealth management may come at a higher cost, it’s worthwhile for those with significant wealth or intricate financial needs. Your choice should align with your unique financial objectives and complexity.
“Wealth manager” and “financial advisor” are often used interchangeably but the professions serve different needs.
Wealth managers work with those who have substantial assets, offering specialized services like financial planning, investment management, tax reduction, and estate planning.
Financial advisors have a broader clientele, catering to various financial situations with basic advice and investment support.
Your choice depends on your specific financial goals and complexity; if your finances are simple, a financial advisor is suitable, while substantial wealth or intricate needs might call for a wealth manager.
Find a Financial Advisor
American Wealth Management is a financial management company based in Reno, Nevada, that caters to both local residents and individuals nationwide.
Feel free to get in touch with our team for tailored assistance in handling your finances and strategizing for your retirement.
Investment advice offered through American Wealth Management (“AWM”), a SEC- registered investment adviser. Certain personnel of AWM may also be registered representatives of M.S. Howells & Co. (“MSH”), Member FINRA/SIPC, a registered broker-dealer, and therefore, may offer securities through MSH. AWM and MSH are not affiliated entities. M.S Howells does not provide tax or legal advice. Please consult your legal or tax advisor regarding your individual situation.