When it comes to your finances, planning for the future may be difficult to do on your own, which is available through professionals like financial advisors and wealth managers. Both can offer similar services but a wealth manager typically only works with high-net-worth individuals. A financial advisor can work with you to create a financial plan and then manage your portfolio of assets to help you hit your goals. Finding the right financial advisor can be as easy as spending a few minutes and allowing SmartAsset to match you with the best options that serve your area.
What Is a Financial Advisor?
A financial advisor is an expert who helps clients with a wide range of financial services. Advisors typically provide financial planning and investment management. In some instances, advisors might only offer one or the other, though.
However, the term “financial advisor” is broad and doesn’t refer to one specific type of advisor. For example, a certified public accountant (CPA) is someone who has earned a certification to work with taxes and accounting. Meanwhile, a chartered life underwriter (CLU) is an expert in the subjects of life insurance and estate planning. In addition, a certified financial planner (CFP) focuses on building clients’ financial plans for their future goals.
Some advisors also work with particular clients, such as retirees or business owners. You can get an idea of what specialties an advisor has by looking at his or her certifications and licenses. Learn more about common advisory certifications.
What Is a Wealth Manager?
Wealth managers are just a subset of financial advisors. The thing that sets them apart from other advisors is their clientele. Wealth managers primarily serve high-net-worth and ultra-high-net-worth individuals. And as the title implies, they usually manage large amounts of wealth for these clients.
Wealth managers work closely with their clients to offer a variety of services, rolled into one comprehensive, advisory package. Services include investment management, financial planning, tax services, retirement planning, legal planning, philanthropic planning and estate planning, among others. A client’s needs are the determining factor for which services a wealth manager will provide.
Many independent financial advisor firms offer wealth management in addition to their other services. You can also find wealth management services from banks and other big financial institutions. Some of the most prominent examples are Fisher Investments, Merrill Lynch, Edward Jones and J.P. Morgan.
The fees that you pay when you work with a wealth manager are similar to other financial advisor fees. Expect to pay a percentage of your assets under management (AUM). Many firms also charge additional fees for individual services or products. These other fees can come in hourly or fixed arrangements.
Financial Advisor vs. Wealth Manager
The most recognizable difference between a wealth manager and a financial advisor is the type of clients that each works with. Some financial advisors are willing to work with just about anyone wanting financial advice or help with their money management. A wealth manager generally only works with high-net-worth individuals.
Another important distinction is that wealth managers may not be regulated by an entity. FINRA oversees the registration and licensing of financial advisors who are managing money for their clients. Wealth managers are also generally more expensive to work with than most financial advisors.
Both wealth managers and financial advisors can charge an hourly fee for their consultation work of around $100 – $500 per hour. The real difference in fees is the charge for assets under management (AUM). Where wealth managers, on average, will charge up to 3% or more of AUM, financial advisors typically cap it at 2% or less and are quite substantially less for larger AUM amounts.
It should be noted that some financial advisors are fee-based advisors. This means that they could receive a commission if they advise you to buy certain securities. While this could be a conflict of interest, financial advisors are regulated so they are bound by a fiduciary duty to put your needs first. Wealth managers, however, typically don’t earn commissions.
Do I Need a Wealth Manager or a Financial Advisor?
The kind of financial advisor you need depends on your individual situation. In general, you should consider a wealth manager if have a high net worth and want comprehensive management of your finances.
However, an important element to consider with a wealth manager, or any other financial advisor, is the minimum asset requirement for opening an account. Morgan Stanley Wealth Management, mentioned above, requires a minimum account size of up to $250,000 or higher. So even if you aren’t a millionaire, you can still work with this group.
Many other wealth managers also accept clients who aren’t super rich. So if your desire is to find an advisor who takes a holistic approach to your financial life, this could be perfect. At the same time, there are some advisors who are more selective. For example, some wealth management firms require a minimum of $1 million, $10 million or even more just to open an account.
If you mostly need a specific service, consider other specialized types of financial advisor. An advisor with a more general background, like a CFP, could also be a good fit. This is especially true if you’re just getting started with investing and need help with your initial planning.
Those who are just starting to invest may also want to consider a robo-advisor. A robo-advisor uses software to manage your portfolio digitally. You often don’t have the ability to talk with a human advisor, but they make up for that with lower fees than traditional advisors.
Financial advisors provide financial planning and investment management services for their clients. The term financial advisor is very general, though. One advisor may specialize in life insurance, while another focuses on estate planning.
A wealth manager is one kind of financial advisor who typically works with high-net-worth individuals. The services of a wealth manager are very hands-on and comprehensive, so that a client can work with just one advisor for all of his or her financial needs. All financial advisors, including wealth managers, set their own minimum requirements. In other words, how much you’ll need in order to work with a certain advisor will vary.
Tips for Choosing a Financial Advisor
- People who work with financial advisors report greater financial security. In fact, research suggests that working with an advisor can result in additional annual investment returns. Finding the right financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- After you narrow down your search to a few advisors, you should contact them to see which is best for you. In addition to their fees and account minimums, here are some questions to ask a financial advisor before you make a final decision.
Do you want to learn more about financial advisors? Check out these articles:
- What is a Fiduciary Financial Advisor?
- What is a Wealth Manager
- What are the Different Types of Financial Advisors?
- Investment Advisor vs. Financial Planner
- Robo-Advisors vs. Financial Advisors
- Financial Planner vs. Financial Advisor
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