.jpg)
TL;DR: Understanding the difference between wealth management and financial planning is key to choosing the right service for your needs.
Main points:
- Wealth management = holistic, high-net-worth focus (investments, tax, estate, philanthropy)
- Financial planning = broad client base (budgeting, debt, retirement goals)
- Different costs, clientele, objectives, and relationships
Planning for your financial future is important to ensure a comfortable lifestyle and retirement. If you want to work with the best professionals, know the difference between wealth management vs financial planning.
These two terms are often used interchangeably, but they aren’t the same thing. This guide will help you to understand the difference between financial planning and wealth management.
The Differences Between Wealth Management vs Financial Planning
If you’re confused about whether you need wealth management vs financial planning, then these points should make it easier to choose.
1. Services and Complexity
When you’re comparing financial planning and wealth management, the latter primarily serves high-net-worth individuals. Wealth management with comprehensive planning takes a holistic approach to managing clients’ wealth. It covers:
- investment management
- risk management
- estate planning
- tax strategies
- philanthropic planning
- succession planning
The ultimate goal is to achieve long-term growth and preservation of wealth.
Financial planning involves creating a strategic roadmap to achieve specific financial goals, which includes:
- budgeting
- retirement planning
- saving for education
- managing debt
- offering basic investment advice
Unlike solely focusing on investment advice, financial planning considers the overall well-being of a client’s finances.
2. Clientele
If you’re unsure if you need wealth management vs financial planning, consider the clientele for these services.
Wealth management services primarily cater to affluent clients with significant assets who face intricate financial circumstances. These clients often need tailored, sophisticated financial solutions because their assets are complex.
Financial planning financial planning serves a wide range of clients, from beginners to those with moderate wealth. The primary focus is to help clients manage their finances to reach life goals like buying a home or retiring.
3. Objective and Approach
Regarding wealth management, the main goal is to preserve and accumulate wealth. You achieve this by maximizing returns while minimizing risks and tax liabilities. Advisors often use a proactive, dynamic investment strategy to achieve these objectives.
Financial planning helps clients achieve goals like buying a home, saving for retirement or funding their children’s education. This comprehensive approach considers all facets of a client’s financial situation.
This is where portfolio management and wealth planning connect. Financial planning can provide the roadmap, while wealth management provides execution and ongoing oversight.
4. Cost and Fees
The cost and fees are another critical factor to consider when deciding between wealth management vs financial planning.
Wealth managers typically charge clients a percentage of their assets under management (AUM). These services often cost more than other options because they are comprehensive.
Fees can vary when it comes to financial planning services. A certified financial planner (CFP) may charge a flat fee, an hourly rate, or a percentage of your assets. Simpler finances call for lower-cost fee structures. A more cost-effective fee structure for financial planning and money management is more suitable in those cases.
5. Relationship and Duration
Another factor to consider is the nature of your relationship with a wealth manager and financial planner. Wealth managers often establish long-term relationships with clients. This is because of the constant management and adjustment of a client’s wealth strategy over time. Wealth managers don’t usually work with a single individual’s interest but an entire family’s.
When it comes to financial planning and financial management, you have two options. Choose a one-time plan or an ongoing partnership that adapts to your goals.
.jpg)
What is the Difference between a Wealth Manager and an Independent Financial Advisor?
When comparing wealth manager vs financial advisor, the distinction becomes clear.
Wealth managers focus on a few wealthy clients, managing their assets and portfolios. They usually work for a firm that offers wealth management services to a select group of clients.
Independent financial advisors offer personal advice and planning to a wider range of clients. They may not belong to a firm. This difference highlights part of the broader debate of financial advisor vs financial planner vs wealth manager. Each serves overlapping but distinct roles.
How is Asset Management for Individuals Different from Wealth Management?
Individual asset management focuses on managing an individual's investments. It includes managing portfolios, creating investment strategies, and buying or selling assets like stocks, bonds, and mutual funds. The objective is to maximize returns based on the individual's risk tolerance and investment goals.
However, wealth management goes beyond just managing assets. It combines asset management with financial planning, tax strategies, estate planning, and even insurance and legal considerations. This holistic model represents portfolio management and wealth planning under one umbrella.
What is the Difference between an Accountant and a Wealth Manager?
While looking into wealth management vs financial planning, you’ll see that some services overlap. This is also the case with accounting and wealth management. Accountants are experts in handling and interpreting financial records. Their key services include:
- tax preparation and filing
- auditing
- financial reporting
- ensuring full compliance with all financial laws and regulations
However, a wealth manager takes care of all aspects of a client’s financial well-being, such as:
- managing investments
- planning their estate
- implementing tax strategies
- ensuring they have a solid retirement plan
Accountants are specialists in accounting principles, tax laws, and financial regulations. They often have certifications such as CPA that validate their expertise. Wealth managers, on the other hand, are experts in investment strategies, financial planning, and wealth preservation. Certifications like CFP or CFA demonstrate their knowledge in these areas.
What is the Difference between a Certified Financial Planner and Wealth Manager?
The difference between certified financial planner and wealth manager boils down to a few things. While the two roles may overlap, their training, focus, and responsibilities are different.
A certified financial planner (CFP) trained to design personalized financial plans. Their focus is on helping clients map out specific goals such as:
- retirement planning
- saving for education
- debt management
- insurance needs
- estate planning basics
Wealth managers on high-net-worth clients who need more than just planning. Wealth managers implement and oversee the broader execution of strategies. This often includes:
- advanced investment management
- portfolio diversification and risk control
- tax optimization strategies
- succession and estate planning for families
- ongoing adjustments as markets and circumstances change
What is the Role of a Financial Advisor in Wealth Management?
Financial planners and advisors assist clients in setting financial objectives and creating a comprehensive plan to attain them. Wealth management often pairs you with a financial planner who helps you reach your goals while growing and managing your wealth.
In wealth management, personalized service helps to meet each client's unique needs. Financial advisors work with wealth managers to proactively adjust strategies to accommodate clients' changing life situations.
Create a Roadmap for a Better Financial Future
Working with Asset Preservation Wealth and Tax means working with a firm that sees the bigger picture. Our comprehensive services allow us to analyze and factor in every facet of your life. From tax strategies to retirement planning, we have you covered so you can have peace of mind about your financial future.
Get a free portfolio review today!
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
Alternative/Private investments are often complex, speculative and illiquid investment vehicles that are not suitable for all investors and are typically only available to accredited investors who meet certain minimum financial requirements. Alternative Investments often engage in leverage and other investment practices that are extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount that is invested. They are, therefore, intended for experienced and sophisticated long-term investors who also have the financial wherewithal to accept such risks.
