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Planning for your financial future is important to ensure a comfortable lifestyle and retirement. If you want to work with the best professionals, you should know the difference between wealth management vs financial planning.
These two terms are often used interchangeably, but they aren’t the same thing. This guide will help you to understand the difference between financial planning and wealth management.
The Differences Between Wealth Management vs Financial Planning
If you’re confused about whether you need wealth management vs financial planning, then these points should make it easier to choose.
1. Services and Complexity
When you’re comparing financial planning and wealth management, the latter is a specialized service that primarily serves high-net-worth individuals. It takes a comprehensive and holistic approach to managing clients’ wealth, covering various aspects such as:
- investment management
- risk management
- estate planning
- tax strategies
- philanthropic planning
- succession planning
The ultimate goal is to achieve long-term growth and preservation of wealth.
Financial planning involves creating a strategic roadmap to achieve specific financial goals, which includes:
- budgeting
- retirement planning
- saving for education
- managing debt
- offering basic investment advice
Unlike solely focusing on investment advice, financial planning takes into account the overall well-being of a client’s finances.
2. Clientele
If you’re unsure if you need wealth management vs financial planning, consider the clientele for these services.
Wealth management services primarily cater to affluent clients with significant assets who face intricate financial circumstances. These clients often demand tailored and sophisticated financial solutions to meet their needs because of the complex nature of their assets.
Financial planning is designed to cater to a wide range of clients, including individuals who are just beginning their financial journey and those with moderate wealth. The primary focus is to assist clients in effectively managing their finances to meet life goals like buying a house or preparing for retirement.
3. Objective and Approach
Regarding wealth management, the main goal is to preserve and accumulate wealth. This is achieved by maximizing returns while minimizing risks and tax liabilities. A proactive and dynamic investment strategy is often employed to achieve these objectives.
Financial planning aims to assist clients in achieving their financial goals, whether purchasing a home, saving for retirement or funding their children’s education. This comprehensive approach considers all facets of a client’s financial situation.
4. Cost and Fees
The cost and fees are another critical factor to consider when deciding between wealth management vs financial planning.
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With wealth management, clients are typically charged a percentage of their assets under management (AUM). It’s important to note that the fees for these services can be higher than other options due to the comprehensive nature of what is provided.
Fees can vary when it comes to financial planning services. A certified financial planner (CFP) may charge a flat fee, an hourly rate, or a percentage of your assets. For individuals with fewer assets and more straightforward financial situations, opting for a more cost-effective fee structure would be advisable for financial planning and money management.
5. Relationship and Duration
Another factor to consider is the nature of your relationship with a wealth manager and financial planner. Wealth managers often establish long-term relationships with clients. This is because of the constant management and adjustment of a client’s wealth strategy over time. Wealth managers don’t usually work with a single individual’s interest but an entire family’s.
When it comes to financial planning and financial management, you have two options. You can either engage in a one-time process to create a solid plan or establish an ongoing relationship where the plan is regularly updated to meet your changing needs and goals.
What is the Difference between a Wealth Manager and an Independent Financial Advisor?
Wealth managers often work closely with an affluent family or a few clients to handle their investment portfolio and assets. They are usually attached to a firm that provides wealth management services to a select group of clients.
On the other hand, independent financial advisors will offer personal financial advice or financial planning to a broader group of clients. They may not be affiliated with a firm.
How is Asset Management for Individuals Different from Wealth Management?
Individual asset management focuses on managing an individual's investments. It entails portfolio management, investment strategy, and the buying or selling of financial assets such as stocks, bonds, and mutual funds. The objective is to maximize returns based on the individual's risk tolerance and investment goals.
However, wealth management goes beyond just managing assets. It encompasses various aspects such as financial planning, tax strategy, estate planning, and even legal and insurance considerations. This holistic approach ensures effective management of an individual's financial situation and wealth.
What is the Difference between an Accountant and a Wealth Manager?
While looking into wealth management vs financial planning, you’ll see that some services overlap. This is also the case with accounting and wealth management. Accountants are experts in handling and interpreting financial records. Their key services include:
- tax preparation and filing
- auditing
- financial reporting
- ensuring full compliance with all financial laws and regulations
However, a wealth manager takes care of all aspects of a client’s financial well-being, such as managing investments, planning their estate, implementing tax strategies, and ensuring they have a solid retirement plan.
Accountants are specialists in accounting principles, tax laws, and financial regulations. They often have certifications such as CPA that validate their expertise. Wealth managers, on the other hand, are experts in investment strategies, financial planning, and wealth preservation. Certifications like CFP or CFA demonstrate their knowledge in these areas.
What is the Role of a Financial Advisor in Wealth Management?
Financial planners and advisors assist clients in setting financial objectives and creating a comprehensive plan to attain them. Wealth management often includes working with a financial planner to help you achieve those goals while accumulating and managing your wealth.
In wealth management, personalized service helps to meet each client's unique needs. Financial advisors work with wealth managers to proactively adjust strategies to accommodate clients' changing life situations.
Create a Roadmap for a Better Financial Future
Working with Asset Preservation Wealth and Tax means working with a firm that sees the bigger picture. Our comprehensive services allow us to analyze and factor in every facet of your life. From tax strategies to retirement planning, we have you covered so you can have peace of mind about your financial future.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
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