The money management field comes with many terms which can be hard to keep track of. Understanding the subtle yet fundamental variations makes a world of difference in how you approach handling your wealth. Take, for example, the contrast between a wealth manager and a financial advisor. On the surface, the words may seem indistinguishable, but there are several critical differences. In this guide, we discuss the distinctions between wealth managers and financial advisors.
What is a Wealth Manager?
A wealth manager is a form of financial advisor or investment advisor, but these professionals tailor their expertise to high net worth clients. Oftentimes firms require a net worth of over $1 million or more just to open an account. Like a financial advisor, a wealth manager provides a bundle of different services like asset management, investment advice, retirement planning, tax planning, estate planning,etc to help you get the most from your money.
Requirements to be a Wealth Manager
Being a wealth advisor or manager doesn’t require any specific certifications, though most managers are usually CFA or CFP® certified. Like any other profession, some wealth managers have more experience and are more qualified than others. Don’t hesitate to interview any potential manager you’re looking into to get a better idea of their certifications and experience and whether or not they’re the right wealth manager for you. You can also use services like the CFP Board verification tool or BrokerCheck one to see a wealth manager’s or any financial advisor’s certifications and background. We recommend that consumers seek financial advisors, including wealth managers, who are registered fiduciaries.
Types of Wealth Management Clients
Wealth managers typically only work with high net worth clients, but in recent years certain firms have made it possible to open accounts despite not being officially classified as a high net worth individual (HNWI.) The SEC defines an HNWI as someone with a net worth of over $750,000. Some firms now have account minimums of $250,000 while others may be even as high as $10 million.
So, who might need wealth management support?
- Business owners
- Families with massive holdings
- Individuals with unique insurance needs
- Investors concerned about interest rates and inflation
- Anyone with retirement accounts
- A business owner in need of a succession plan
Wealth Manager Services
A wealth manager provides a host of different services including estate planning, asset management, retirement planning, investment management, financial planning, tax services and more. They do not help with smaller services like budgeting or cash flow planning.
Remember, as a portfolio manager, you could plan a wealth management firm in charge of your investing strategy, rebalancing of your portfolio, savings plans, tax plans and more.
Wealth Manager Fees and Cost
How you pay your wealth manager varies. The most common method is paying a percentage of however much of your wealth he or she is managing. For clients with under $1 million under management that number typically hovers around 1%.
Clients with over $10 million may pay around 0.7%. Some companies may just charge fixed annual fees ranging anywhere from $10k to $60k depending on the size of your account. Although not as common, some managers may also work for an hourly rate.
Ask about the fee structure, see if you can gain concessions on certain services and allow your investment pro to guide your wealth management strategies so that you can get back to your life and routine.
What is a Financial Advisor?
The term financial advisor can mean several different things depending on the type of advisor you are looking for. While individual financial advisors can handle multiple aspects of financial planning, it may not always be the case. This differs from a wealth manager in that wealth managers will usually always offer several services under one roof to ensure you’re working with the same person to handle all aspects of your money.
Requirements to be a Financial Advisor
Given the broad nature of what a financial advisor is, the range of different certifications is also broad. A CPA licensed financial advisor might help with taxes while a CLU certified advisor specializes in estate planning, risk management, and life insurance. The most common certification you will find for a financial planner is a CFP® (certified financial planner). Other certifications you can come across are a ChFC (chartered financial counselor), CFA (chartered financial analyst) and FRM (financial risk manager).
One important requirement which does not come in the form of official certification is ensuring your advisor or wealth manager are fiduciaries. Fiduciaries are registered with the SEC and are compelled by law to always have your financial best interest in mind.
Financial Advisor Services
As we’ve alluded to before, the scope of what a financial advisor can offer the client is large. What services you need will be specific to your situation. Some services we haven’t mentioned thus far include money coaches (advisors that help analyze the money you have and help you better spend and budget it.) There are also credit counselors that help people overcome large amounts of debt. Financial advisors can help with planning for a divorce or small business development as well.
Financial Advisor Fees and Cost
Paying a financial advisor is similar to paying a wealth management advisor. Some have a commission, where they take a percentage of however much you’ve invested through them. These fees usually range anywhere from 3-6%, depending on the amount of money being managed. There are also annual retainers typically ranging anywhere from $2,000 to $11,000, flat fees (~$1,000 - $3,000) and hourly rates (~$120-$300.)
Wealth Manager vs. Financial Advisor: Who Should You Pick?
To summarize, choosing a financial advisor or a wealth manager comes down to your financial situation. High networth individuals should consider a wealth manager who is more familiar with dealing with high levels of wealth.
Work with a Wealth Manager If…
Here are some questions you may want to ask yourself if you’re contemplating hiring a wealth manager.
- Do you have enough money to open an account?: While the SEC classifies this as someone with a net worth of over $750,000, some firms allow account minimums of around $250,000.
- Do you not have the acumen to comfortably manage your own wealth?: Having a high enough net worth to hire a wealth manager doesn’t automatically mean the individual knows how to effectively do it alone. And that’s perfectly okay. Managing one’s net worth can be a daunting idea for someone without professional training in that realm.
- Do you want one person to handle all aspects of your wealth?: Wealth managers deal with everything in terms of an individual’s life wealth as opposed to one or two specific needs. Financial advisors can handle more focused services without including the others.
- Do you not have time to manage your wealth?: Simply put, many people don’t have the time to manage their money but don’t want to just passively invest in ETFs. A wealth manager can help handle the aspects of financial wealth management that you don’t have time for.
Work With a Financial Advisor If…
If the questions below adhere more to your needs than the ones above, a financial advisor may be right for you.
- Do you not have a high enough net worth for a wealth manager?: If you do not reach certain account minimums to open a wealth management account but still wish to have guidance in managing your money, a financial advisor is a great option.
- Do you only desire guidance in one aspect of managing your money?: Financial advisors come in all shapes and sizes, all meant to help you tackle specific issues. For example, if you only desire help with taxes, and not investment management, certain financial advisors can easily help with just that.
- Do you need a gameplan on how to use your money effectively?: Financial advisors are trained to help you set long-term goals on how to get the most out of your money in light of your circumstances, objectives or ambitions.
- Do you not have time to handle your own money?: Not having time to worry about money isn’t just reserved for high net worth individuals. Everyone’s busy, and your dream retirement won’t plan itself. If you don’t want to deal with some of the things a financial advisor can help you with, that’s why they’re there.
Benzinga’s Best Wealth Managers and Financial Advisors
- Best for Retirement Advice: Datalign
- Best for Comparing Advisors: SmartAsset
- Best for Financial Planning: Domain Money
- Best for Customer Care: Charles Schwab
- Best for New Investors: WealthSimple
Best for Retirement Advice: Datalign
By utilizing data-driven insights, Datalign Advisory aims to empower consumers to make informed decisions and achieve their financial goals. Empowerment, in the form that’s offered to you by Datalign, equates to focused, transparent and simple user experience. Then, you get connected with vetted financial advisors who have a fiduciary duty to serve you.
The beauty of Datalign is that you can connect with someone who can help you plan for the future, get right in the present and feel as though you can get back to your routine instead of worrying about money.
- You can get linked with a fiduciary that might have been difficult to find otherwise
- You can plan for the future or just set up your finances for today with your planner’s or advisor’s help
- Data-driven technology cannot ensure you that you will get the exact financial results you want
Best for Comparing Advisors: SmartAsset
SmartAsset is a financial platform that starts you off with a quiz that aims to learn more about you and your financial situation. You can learn what you should change, read about credit cards, mortgages and more. Plus, you will connect with an advisor whom you can get to know very well and push forward with into the future.
You can even use calculators on the site to learn the cost of managing your money, and with that information, you can better brainstorm for your future with your financial advisor, found by SmartAsset.
- SmartAsset moves quickly
- You can learn about a lot of financial tools you use every day
- Connecting with a financial advisor very quickly does not guarantee a good fit
Best for Financial Planning: Domain Money
Signing up for Domain Money allows you to build the crypto portfolio that will do what you need, when you need it. There are 5 portfolio styles that include:
- Domain Edge: The 100%, turnkey crypto portfolio that gives you instant exposure to this asset class.
- Domain Core: A 100% stock portfolio that focuses on companies working with the blockchain, mining and in other parts of the crypto space.
- Domain Balanced: Targeting innovative projects and stocks, with 50% on crypto and 50% on stocks.
- Domain Metaverse: A crypto and stock portfolio that offers unique exposure to the NFT space.
- Domain Access: A portfolio that features 80% stocks and 20% crypto.
Each of these portfolios can work into the strategy that you prefer. Plus, there are no lockups, minimums ranging from $100 to $500 and a 1% annual management fee. This is a place where you can save cash with crypto, get help building a crypto portfolio and seek out the customer support you need. You aren’t left investing blind, and you are in complete control of your funds.
- With a low minimum, you can start investing at any time
- The annual management fee is very low, considering how much other platforms charge
- You may not feel like the portfolio styles offered will work for you
Best for Customer Care: Charles Schwab
Charles Schwab is an online investing service that many older readers might remember from commercials featuring their founder and namesake. He guaranteed quality customer care and results, and now the firm has greatly expanded its services in recent years, including financial advisory services.
You can visit a branch near you get to get in-person support, or you can manage your account online and take advantage of Intelligent Portfolios. Yes, the minimums start at $5,000 for an Intelligent Portfolio, but all other services have low to no minimum, meaning that you can get the advice you need and plan for the future.
- Charles Schwab is focused on customer care
- Intelligent Portfolios offer more support and investment options than many of their competitors
- High minimums could derail those who are trying to start small
Best for New Investors: WealthSimple
WealthSimple is an excellent choice for all those who need automated investment options. You can choose from 3 portfolio styles that are deemed socially responsible. Plus, you will pay a fairly low price of 0.4% to 0.5% to get the support you need, and you can even use an Islamic investing account that falls into line with those teachings.
In other words, anyone can invest with WealthSimple and not be an expert. WealthSimple does most of the work for you. By investing in emerging economies, green technology and more, you can make the most of your money and ensure that your money goes as far as it possibly can.
- Low fees are helpful for anyone who is afraid to lose money while investing and saving
- The WealthSimple platform also has Halal accounts for those who require these unique instruments
- While fees are low, you may feel like you need a more robust form of portfolio curation
Frequently Asked Questions
Who needs a wealth manager?
Anyone who has assets to manage could stand to speak with a wealth manager. However, most wealth managers tend to work with families that have quite a lot of entangled assets or individuals with massive holdings.
Is a wealth manager worth the money?
Yes, if you have enough money to hire a wealth manager, it’s often better to hire someone to help you manage all those assets. However, you’re free to manage your assets alone, if you so choose.
Should young professionals hire a financial advisor?
Hiring a financial advisor early on is a good way to build good money habits and plan for the future.
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