Wealth Management vs. Financial Planning

Wealth Management vs. Financial Planning

November 8, 2022
An Adviser explains Wealth Management vs Financial Planning to her clients

Wealth management vs. financial planning: Investors often ask if there’s a difference.

The differences are important for building a strong financial future. 

(We’ll also discuss what separates a wealth manager from a financial adviser.)

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Wealth Management vs. Financial Planning

The key difference between financial planning and wealth management is that financial planning is just one tool used to create a comprehensive wealth management strategy; a unique framework defining how you’ll achieve, grow, sustain and distribute your wealth.

Encircling each individual investor’s wealth management strategy are your financial and personal goals.

The wealth planning tools that build your wealth management strategy include estate legacy planning, family gifting and lending, financial planning, investment planning, tax planning and more.

The outer circles in the following diagram illustrate the wealth management tools used to build a comprehensive wealth management strategy. If you neglect even one component, your wealth could be compromised.

The outer circles in the following diagram illustrate the wealth management tools used to build a comprehensive wealth management strategy. If you neglect even one component, your wealth could be compromised.

Why the Difference Is Significant

It helps to understand the difference between financial planning and wealth management.

Why?

Because if you skip any component (tools) of a wealth management strategy, you expose yourself to unnecessary financial risks, like these four scenarios:

#1. Accepting an executive compensation plan without first having a financial planner review it (resulting in company stock overconcentration or unnecessary tax burdens that could have been avoided using deferred compensation strategies). 

#2. Claiming Social Security at an inopportune time (unnecessarily pushing yourself into a higher tax bracket).

#3. Missing Medicare deadlines (resulting in an ongoing 10% financial penalty).

#4. Neglecting using trusts to tax-efficiently pass wealth to your heirs (and avoiding probate).

Tip: Understand 5 essential estate-planning must-haves with our estate-planning checklist.

Difference Between ‘Financial Adviser’ and ‘Wealth Manager’

Let’s also understand the key difference between a “financial adviser” and a “wealth manager.” A financial adviser guides you through many aspects of your financial life, e.g., explaining how much life insurance you need or answers questions like: Can you retire on $500k plus Social Security (or $700K, $2 million, etc.)? Whereas, a wealth manager is typically defined as the actual person investing your money, i.e., buying and selling bonds, stocks, ETFs, etc. in addition to overseeing your entire financial future.

Our firm uses the titles financial planner (rather than financial adviser) and wealth adviser (rather than wealth manager).

Why?

To answer this, it’s important to understand that not all financial advisers can literally call themselves designated financial planners. The latter requires vigorous training and additional education to achieve the status of a CERTIFIED FINANCIAL PLANNER™ professional (CFP®). We consider this advanced knowledge critical for helping high-net-worth individuals build a comprehensive wealth management plan and, therefore, we employ numerous financial planners able to help our clients at no additional cost.

Tip: For detailed information regarding building a wealth management plan, read our special reports.

Why wealth adviser rather than wealth manager? Because a client’s goals and personal circumstances change, and the latter must be at the forefront of every investment activity.

This approach ensures investment initiatives encompass everything in a client’s life; loved ones pass away, aging parents need more support, high-net-worth divorces (financial checklist) happen and many other life milestones occur every day.

Next Steps

There’s a lot of financial jargon, but taking the time to understand the difference between financial planning and wealth management, and their related job titles, is key to your financial future.

To optimize your life’s savings, protect your family, leave money to heirs tax-efficiently and support the causes you care about, you need a comprehensive wealth management strategy facilitated by financial planners and wealth advisers. These are the trained professionals who look at your life holistically and incorporate every financial component, life milestone and personal goal within your wealth plan.

Contact Adviser Investments anytime for assistance. We pride ourselves on being The Planner You Can Talk To.


Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.
Our statements and opinions are subject to change without notice. All investments carry risk of loss and there is no guarantee that investment objectives will be achieved.
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