Wealth Manager vs Financial Advisor: The Differences Explained

Most people are aware of financial advisors. These are the people that offer anyone and everyone advice and guidance on how to manage their finances to plan for the future.

Fewer people are familiar with wealth managers, though. Those who aren’t aware of them just think they are the same as a financial advisor. But that’s because the only people who know what wealth managers are are those people that have wealth.

We all have finances, but few of us have real wealth. So, wealth manager vs financial advisor, what exactly is the difference, which one do you need, and how can you organize your finances for a safe and comfortable future?

Keep reading below to learn the difference between managing finances and managing wealth.

What Is a Financial Advisor?

The term financial advisor is very broad. It covers a wide variety of people under the advisory umbrella.

In general, it means that someone has financial education and certification, and is legally allowed to speak on specific financial topics and give proper advice.

If you spend any time watching financial videos on YouTube or listening to podcasts, you will hear people recite disclaimers over and over again saying that they are not financial advisors and cannot give investment advice.

This is because if they don’t have the proper license, then any advice they give can get them into trouble if someone follows their advice and loses money.

So what does a financial advisor do? They are those with the correct licenses in order to legally provide investment advice. And when most people refer to a financial advisor, they are usually referring to a subset of advisors known as a financial planner.

These are the people who offer individual planning for a client’s finances and investments. They can provide insight on how to set budgets, what types of insurance they should have, and what they should be investing in now to secure a comfortable retirement in the future.

Financial planners can work with all types of clients, whether you make a little bit of money, or a lot. Though most planners have a specific type of client that they cater to.

What is a Wealth Manager?

A wealth manager would also fall under the umbrella of a financial advisor. But just like financial planners, they are a particular subset of financial advisors.

But wealth managers are those that cater to high-net-worth individuals. These people have actual wealth that they need to manage, as opposed to regular income.

Think of a professional athlete. Maybe they get signed by a big team, and all of a sudden have millions of dollars coming into their bank account. While most first-time professional athletes go out and buy the most expensive car right away, some are smart enough to hire a wealth manager.

Wealth managers work with these types of clients, and others with high incomes. But what does a wealth manager do?

They provide investment advice, helping clients to invest in the right assets now so that in the event they lose their income in the future, they don’t have to go back to work.

We’ve all heard the horror stories of Hollywood actors who made a ton of money during their short time as an actor, only to spend it all and have to go back to work at a grocery store. As you may have guessed, they are the ones who didn’t hire a wealth manager.

Wealth managers will also help their clients with taxes, legal planning, estate planning, philanthropic giving, and much more.

Wealth Manager vs Financial Advisor

So what’s the main difference between a wealth manager and a financial advisor, or financial planner? They will both do a lot of the same activities; providing investment advice, organizing finances, choosing insurance plans, and so forth.

The main difference, though, is the type of client they serve. Anyone making the median household income in America of $67,000 can work with a financial planner to organize their finances and invest for the future.

But if that’s you, you wouldn’t hire a wealth manager, because you aren’t wealthy, and you aren’t considered a high-income earner (though hopefully, you will be in the future).

Wealth management typically starts when you have at least $250,000 in assets. Though some wealth managers have their own set minimum of one million, ten million, and so forth.

In either case, you will typically pay for financial manager a percentage of your assets under management (AUM). So it makes sense for wealth managers to just want to stick with very high earners since each client will earn them much more money.

They might only have a handful of clients compared to a traditional financial planner, but they can earn a lot more money doing so. But since the market for high-net-worth individuals is much smaller, they need to rely on effective wealth management marketing to attract the right types of clients.

Organizing Your Finances

Do you want the benefit of working with a financial planner now, even if you can’t quite afford their services? There are a few basic steps you can take to make the most of your current financial situation.

For one, if your company offers a retirement plan and a company match, you should be maxing out your contributions. Your company is essentially offering you free money, so you should do what it takes to get as much of it as you can.

Next up, you should open another investment account. This can be a standard brokerage account that you can add money to at any time. Set up recurring deposits into this account, and dollar cost average income certain stocks or index funds on a regular basis.

And make sure you have automatic deposits into a savings account. You want to ensure you never have to go into emergency debt, which can wipe out any wealth you accumulate. Have savings in store for those rainy days, broken down cars, and hospital visits.

Build Your Future Today

Wealth manager vs financial advisor, now that you know the difference, you can decide who you are going to hire to plan your future. Their services are invaluable, as they will help you maximize your financial situation and set your course towards a happy and secure retirement.

And the peace of mind that comes with that? Priceless.

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