Wealth Manager vs. Financial Advisor: What's the Difference?
People often hope to have bright financial futures.
Wealthy people don’t usually become wealthy without taking targeted actions, though.
Specifically, wealthy people often have systems in place to manage their personal finances.
Some manage their money themselves.
Others may hire a financial advisor or a wealth manager.
You may be wondering what the differences are between a wealth manager vs. a financial advisor.
While they sound similar, they’re very different services.
Here’s what you should know to figure out which is a better fit for your situation.
What is a Wealth Manager?
Wealth managers are truly for high net worth individuals.
They provide a wide array of services to their high net worth clients.
You must have a minimum amount of investable assets to work with them, though.
Investable assets are generally considered:
- Cash
- IRAs
- Taxable investment accounts
- Other money you can move under the wealth manager’s management
Exactly how much you’ll need depends on the wealth management firms you’re considering.
You often need $2 million, $5 million, $10 million or more to get started.
That said:
Some wealth managers accept clients with investable assets as low as $250,000 to $1 million.
Typically, these clients have incredibly high paying executive-level jobs.
Others may own a small business or a mid to large-sized company.
If you meet these requirements, you may be curious about what wealth management services are offered.
Normally, these managers offer the following services:
- Investment management (also called portfolio management)
- Retirement planning, including cash flow management
- Estate planning, including estate tax management
- Legal services
- Tax planning
- Charitable planning
- Several other services and financial advice
The wealth managers often consult with other experts to help solve any issues that pop up within your financial plan.
Licensing and certifications
Wealth managers often are regulated by FINRA and the SEC.
Technically, there isn’t a license to call yourself a wealth manager, though.
Wealth managers may operate as part of a large company. They may also work on their own as a registered investment advisor (RIA).
Some wealth managers may take steps to become a Certified Financial Planner (CFP), but it isn’t required.
Other potential certifications could include:
- Chartered Financial Analyst (CFA)
- Chartered Financial Consultant (CFC)
- Certified Investment Management Analyst (CIMA)
- Certified Public Accountant (CPA)
- Certified Private Wealth Advisor (CPWA)
- Certified Trust and Financial Officer (CTFA)
Wealth managers likely need specific financial licenses to run their business. These could include:
- Series 3
- Series 6
- Series 7
- Series 63
- Series 65
- Series 66
Where to find a wealth manager
Finding a wealth manager shouldn’t be too difficult.
Chances are, the banks of investment firms you already do business with may have a wealth management division.
You can speak with a representative to find out if they do. Then, talk to a wealth manager to see if they’re a good fit.
Another way you could find a wealth manager is to ask for referrals from friends or colleagues that may have wealth managers.
You can always do a quick Google search to find wealth managers in your area, too.
What is a Financial Advisor?
The term financial advisor isn’t technically regulated. In fact, many people can call themselves financial advisors.
Sometimes life insurance salespeople call themselves financial advisors. This may happen even if they don’t offer investment management services.
Most people consider financial advisors to be people that help you manage your investments and personal finances.
These financial advisors can work with you to plan for retirement and other money goals.
Financial advisors handle many of the same aspects wealth managers do, just on a less detailed level.
Common services
Financial advisors may help you build a financial plan and enact that plan. This can include the following services:
- Investment management (also called portfolio management)
- Retirement planning, including cash flow management
- Tax planning related to your investments
- Charitable planning
- Several other services and financial advice
The difference is these services aren’t often provided on as comprehensive of a level as wealth managers may provide.
For instance, a financial advisor may structure your investments in a tax advantageous way.
However, they may not provide advice about managing taxes for your small business, depending on the relationship.
Wealth managers may work directly with lawyers and estate planning individuals.
Financial advisors may refer you to experts to work on these items yourself.
Ultimately, the services your financial advisor provides depend on your agreement with the advisor and what you pay for.
Different fee models
Even within the financial advisor community, there are many different types that work using different fee models.
Some financial advisors will work with anyone no matter how much they have in investment assets.
Advisors who work with people with little to no assets usually charge a fee for their service or time.
Others may sell financial products that earn them commissions.
Unfortunately, commissioned products almost always have better and lower-cost non-commissioned versions.
Even so, financial advisors deserve to be paid for their advice.
If working with an advisor that sells these products is the only way you’ll start investing, it’s better than not starting.
Other advisors may only work with you once you reach a certain investable asset level.
This could be $100,000, $250,000, or some other level.
These advisors often work for an assets under management fee. This is an annual fee equal to a percentage of the assets they manage on your behalf.
Licensing and certifications
Like wealth managers, financial advisors are often are regulated by FINRA and the SEC.
Financial advisors can work at several different types of companies, too.
For example, some may work at a bank while others work at their own registered investment advisor (RIA) firm.
Financial advisors can take steps to earn certifications.
They may decide to pursue and earn the Certified Financial Planner (CFP) designation. It isn’t a requirement, though.
Other potential certifications are the same as a wealth manager and could include:
- Chartered Financial Analyst (CFA)
- Chartered Financial Consultant (CFC)
- Certified Investment Management Analyst (CIMA)
- Certified Public Accountant (CPA)
- Certified Private Wealth Advisor (CPWA)
- Certified Trust and Financial Officer (CTFA)
To sell certain products, financial advisors need some financial licenses to run their business. These could include:
- Series 3
- Series 6
- Series 7
- Series 63
- Series 65
- Series 66
Where to find a financial advisor
You can find financial advisors at banks, insurance companies, and their own financial advisory firms.
They may also work at large brokerage firms, too.
Consult with the financial institutions you work with to see if they offer financial advisors that may fit your needs.
You can also ask friends for referrals, search Google, or search financial advisor databases for a good fit.
Like with a wealth manager, it’s wise to find an advisor that’s a good fit before moving forward.
Which is Better for You?
Deciding between a wealth manager and a financial advisor will depend on your situation.
Wealth advisors provide more in-depth services, but only to extremely high net worth individuals.
Most everyday people don’t need wealth managers. Instead, they may benefit from a financial advisor.
Advisors may have their own minimum asset requirements. You should still be able to find one willing to work with you no matter how much you have to invest.
Most advisors offer enough services for someone starting their financial journey.
Considerations When Choosing a Wealth Manager or Financial Advisor
Picking the right financial advisor or wealth manager is essential.
If you pick the wrong one, you may not end up having the best experience.
Consider the following when choosing your financial professional.
Fees
Fees are how your advisor or manager gets paid, but they also eat into your returns.
Every dollar you pay in fees is one less dollar that earns compounded returns over decades.
Look to find a reasonable fee for the services you’re requesting.
Keep in mind, the more services you require, the more you generally pay.
Services
Each wealth manager or financial advisor may offer different services.
Ask for a list of services they provide for the fee they charge.
Make sure they offer the services you need before considering a financial professional.
Track record
It’s essential to do your due diligence on the people managing your investments.
First, check FINRA’s database for any negative comments about the advisors.
When you speak to the advisor, ask them to share their history managing investments.
You’ll also want to ask about their historical returns if you want them to actively manage your investments.
Personal fit
Finally, you should feel at ease speaking with your financial professional.
You should feel like they’re on your side, not competing with you.
You need to be able to easily relay any concerns you have.
If it feels like a confrontation or an event you’re dreading, it isn’t a good fit.
If it’s not easy to speak with your professional about sensitive financial topics, you should keep looking for the right professional.
Reach Out to Get Started
Now you can determine whether you need a wealth manager or financial advisor. Once you have, it’s time to find one to help you.
Research a list of a handful of wealth managers or advisors you feel may be a good fit for your circumstances.
Then, call and schedule appointments to interview them. Make sure their philosophies and services match up with your needs.
The opinions expressed by financial advisors and wealth managers depend on their perspectives.
That’s why it’s essential to find a good fit before moving forward with any manager or advisor.
