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Wealth manager vs financial advisor: decoding key differences

A wealth manager specializes in a broad range of services to support high-net-worth individuals, while a financial advisor typically offers services in one specialty area to people across all asset levels.

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January 29, 2024

6 minutes

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Key takeaways
  • Client base: Wealth managers typically work with high-net-worth individuals and families; financial advisors tend to work with clients with a range of levels of wealth.
  • Services: Wealth management includes comprehensive financial planning; many advisors focus on investment management, but some provide more extensive services.
  • Credentials: Wealth managers often hold advanced degrees and certifications; financial advisors may have a range of qualifications, from basic licenses to advanced certifications.
  • Compensation: Wealth managers typically charge a percentage of assets under management (AUM); advisors may use AUM, hourly fees, or commissions.

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      When you first hear the words wealth manager and financial advisor, you may immediately wonder, “Aren’t they the same person?” The quick answer is no. There are various differences that separate a wealth manager vs. a financial advisor, but the primary differentiating factor is their clientele. Let’s explore the contrast between these two roles to help you figure out if you need one of them on your financial team.

      What is a wealth manager?

      A wealth manager is a financial professional whose specialty is providing strategic guidance to people with substantial assets. This expert takes a comprehensive approach to managing their client’s wealth, going beyond just investment strategies. They also typically incorporate tax-minimization strategies, estate management, and retirement planning

      A list of ways a wealth manager can help you

      Their primary goal is to optimize and protect the overall financial well-being of their high-net-worth clients. They create customized, diversified tax minimization and wealth-building strategies to meet their client’s financial goals while helping them navigate the complexities of wealth accumulation, preservation, and distribution.

      Wealth managers don’t have a universal minimum net worth requirement, so wealth management firms typically set their own guidelines that could range from $250,000 to $1 million or more. 

      Wealth managers typically charge fees based on a percentage of the assets they manage for their clients, known as the "assets under management" (AUM) model. The resulting fees are proportionate to the total value of the client's assets under the management of their wealth manager.

      What is a financial advisor?

      A financial advisor is a professional who offers guidance on various aspects of personal finance to individuals or businesses. Their job is to assess their client’s risk tolerance and financial goals to help them make informed decisions. Most focus on investment strategies, but some specialize in budgeting, retirement planning, and insurance

      A list of ways a financial advisor can help you

      Financial advisors may use a variety of compensation structures, including hourly fees, AUM, or fixed fees for specific financial planning services. Some financial advisors may also earn commissions on financial products they sell to clients.

      Spotting the differences

      Just like in the classic children’s magazine Highlights, spotting the differences between two similar things can be challenging. So, we’ve laid out the main contrasting points between a wealth manager and a financial advisor to make it easier for you.

      Wealth manager Comparing the details Financial advisor
      Comprehensive financial planning to protect and grow wealth Financial focus Investment and portfolio management
      High-net-worth individuals and families Client base Individuals and businesses with a range of levels of wealth
      Holistic financial planning, including tax planning, estate management, and retirement planning Services Investment strategies, portfolio management, budgeting, insurance
      Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), Chartered Wealth Manager (CWM) Certification options Chartered Financial Analyst (CFA), Certified Investment Management Analyst (CIMA), Chartered Life Underwriter (CLU), Series 7 or Series 66 license
      Percentage of assets under management (AUM) Compensation Commission-based, AUM, fee-based, or a combination
      Projected to be long-term to address holistic financial goals Relationship length Varies widely depending on the exact services requested

      Available services

      Wealth Managers offer a comprehensive suite of services, going beyond basic financial advice to handle investment management, tax planning, estate management, and more. Financial advisors may also focus on many of these areas, but most specialize in investing, retirement planning, and portfolio management.

      Qualifications

      Although the title of wealth manager is not an official credential,  most are armed with advanced educational backgrounds and certifications such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Chartered Wealth Manager (CWM). 

      Financial advisors also possess a variety of credentials,  like Certified Financial Planner (CFP) or Chartered Life Underwriter (CLU). Some may receive securities licenses such as Series 7 and Series 66, depending on their service specialty. Like wealth managers, there is no government-set requirement for financial advisors to secure any of these certifications.

      Fee structures

      Compensation for wealth managers usually involves a percentage of assets under management (AUM), illustrating their commitment to matching their success with their client's portfolio performance. On the other hand, financial advisors use a variety of compensation models, including AUM fees, hourly fees, fixed fees, or commissions. The type of fee structure they offer depends on the services provided.

      Relationship duration

      With a focus on building enduring relationships, wealth managers often work with clients over the long term, adapting strategies to evolving financial situations and goals. Client relationships for financial advisors can vary in duration, with some providing more transactional or short-term services, depending on the client's needs and preferences.

      Do you need a wealth manager or financial advisor?

      When looking at your financial future, if you find yourself longing for some clarity in a sea of financial jargon, you're not alone. Deciding whether you need a wealth manager or a financial advisor will depend on the details of your personal financial situation, your overall goals, and the level of expertise you prefer.

      Comparison list of reasons to hire a wealth manager vs financial advisor

      If you're a high-net-worth individual with substantial assets and complex financial needs, a wealth manager might be the ideal fit for you. They can assist with tax planning, estate management, and crafting personalized strategies tailored to your objectives for growing and protecting your wealth.

      On the other hand, if you're looking for more general financial advice, have a smaller net worth (i.e., less than $250,000), and have a focused financial need in one area of expertise, a financial advisor will work best for you. Because they cater to a broader scope of wealth levels, they can help find tailored solutions to support your financial goals. 

      The Playbook take: Optimize your wealth (no matter how much it is)

      Figuring out whether a wealth manager or financial advisor is right for your financial goals can be a challenge. The decision between the two should be informed by the specifics of your financial needs:

      • Complex Wealth Management: If you have high net worth and are juggling diverse assets and intricate goals, need to preserve and pass down wealth, and want a holistic approach to your financial well-being, a wealth manager is likely the best fit for you. 
      • Focused Financial Advice: If you’re more focused on investment-related decisions or your retirement portfolio, a financial advisor might be worth hiring.
      Are all wealth managers fiduciaries?

      No, wealth managers are not required to be fiduciaries, so it’s important to ask them directly about their fiduciary status to be sure. The fiduciary duty is a legal and ethical obligation to act in their client’s best interest, putting the client's needs above the advisor's or firm's interests. While many wealth managers operate as fiduciaries, it's not a universal rule, unless they hold credentials, like the Certified Financial Planner certification, which require them to be a fiduciary.

      How much money do I need to hire a wealth manager?

      Some wealth management firms may have minimum asset requirements starting around $250,000 to $500,000. Others catering to high-net-worth individuals may use higher thresholds, ranging from $1 million to several million dollars. The exact minimum amount varies across the industry, with some being more flexible in their requirements.

      How soon after a windfall should I hire a wealth manager?

      The sooner you partner up with a wealth manager, the better. It doesn’t matter if the money comes from an inheritance, business sale, lottery win, or other significant gains. Having a skilled financial professional by your side from the start will allow for better strategic tax planning and maximizing the benefits of your wealth. 

      About the author

      Phil Wettersten, Series 7 & 66

      Head of Product Success

      Phil holds both Series 66 and Series 7 credentials and previously served as an Investment Consultant at TD Ameritrade. At Playbook, he's the authoritative voice representing our customers, spearheading product enhancements and strategic planning. Phil's unwavering dedication keeps us ahead in delivering top-notch user experiences.

      Tanza Loudenback, CFP®

      Editor

      Tanza is a CFP® certificant, writer, and editor. From 2015 to 2021, she was a top-read author and editor at Insider. Her work focuses on helping people make smart decisions with their money and is published by a variety of online publications.

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