Some people find managing their finances difficult, especially when planning for the future or dealing with investments and businesses. Luckily, there are plenty of professionals out there who specialize in offering these services and can help you, such as wealth managers and financial advisors. But what is the difference between these two specialists?Â
Keep reading before seeking financial advice to make sure you’re looking in the right direction.Â
What is a Wealth Manager?
A wealth manager is a type of financial advisor, with the main difference being in their clientele. Wealth managers tend to serve high-net-worth individuals, as indicated in their name. They might have a minimum earnings requirement for you to hire them.
Wealth managers tend to offer a variety of services all grouped into one comprehensive package. These services include investment management, tax services, financial planning, retirement planning, legal services, estate planning, and much more. Wealth managers are often more than happy to tailor their services to their specific clients’ needs.
You can find wealth management services through banks and financial institutions. While your local establishment might not have what you’re looking for, larger corporations will often be able to help with this need.
Wealth managers are paid similarly to other financial advisors, so you can expect to pay a percentage of your assets under management (AUM). You might also find your chosen firm charging additional fees for extra services.
What is a Financial Advisor?
A financial advisor is an expert within the financial services sector who offers their clients a wide range of financial help. They generally offer financial planning and investment management as the baseline services, although others only offer one or the other. Most people can generally hire financial advisors as they often don’t have specific client requirements in place like wealth managers.
With that being said, some financial advisors specialise in one form of advice rather than generalised advice. For example, a certified public accountant (CPA) is an advisor who holds certification in taxes and accounting, while a chartered life underwriter (CLU) specialises in life insurance and estate planning. So, you can often find a financial advisor specialising in the field you need help with most.
You’ll find that some financial advisors work with specific clients, such as business owners and retired people. The majority of advisors will have this stated in their credentials or on their website, so you can get a better understanding of who will help you the best.
Choosing Between Financial Advisors and Wealth Managers
The most obvious way to choose between a financial advisor and a wealth manager is to determine the type of wealth you’re working with. While some financial advisors are willing to work with the majority of people seeking advice, others specialise in working with specific clients. For example, a wealth manager will typically only work with high-net-worth clients.
Another distinct difference between financial advisors and wealth managers is that the latter might not be regulated by an entity. Most financial institutions regulate their advisors to make sure you’re working with the best person for you. Wealth advisors also tend to charge higher fees.
What Kind of Fees to Expect?
Both financial advisors and wealth managers often charge an hourly fee for their consultation services, typically charging between $100 and $500 an hour. Both will charge a percentage of your AUM, but the difference is in how much you need to pay on these. While financial advisors will often cap these at 2%, you might find wealth managers charging 3% or more.
The reason why some financial advisors charge less is that they are fee-based, which means they might get a commission if they advise you to buy certain securities. This is generally safe to do as financial advisors are regulated and therefore bound to put your interest first rather than creating a conflict of interest. Wealth managers don’t tend to earn commissions so there is no conflict of interest.
Final Thoughts
Financial advisors provide plenty of services for the majority of people seeking help, such as financial planning and investment management. The term is generalised, so there are many advisors that offer tailored advice depending on what you need help with. This can help you get specific advice rather than general management, which can benefit you in the long run.
Wealth managers are a specific type of financial advisor who typically work with high-net-worth individuals. Wealth managers tend to put more time and attention into their clients, giving you more comprehensive advice on your assets. Wealth advisors tend to be more expensive and they’ll often set specific requirements for their clients before accepting their business. For example, you might need to earn a specific amount of money before working with a wealth manager.Â
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