Wealth management and financial planning both deal with money management. However, the two services have many distinct differences. By understanding these differences, clients can make an informed decision about which service is best suited for their unique financial situation. So, what is the difference between wealth management vs financial planning?
What Is Financial Planning?
Financial planning is the strategic process of evaluating a person’s current income, investments and assets to help meet important monetary goals. The process involves gathering information on assets, such as real estate property and vehicles, as well as liabilities, such as credit card debt and car loans. Creating a financial plan also means finding out where the client’s money is spent each month. Individuals involved in financial planning often create budgets to see where each dollar goes. With this information, they can find ways to cut back on spending and gain greater control over their finances.
What Are The Requirements To Be A Financial Advisor?
A financial advisor may work independently or be employed by a financial firm. To become a financial advisor proper licensing is required.. Ideally, a financial advisor may have taken courses in finance, risk management, investments and estate planning.
Becoming a Certified Financial Planner (CFP) requires a more extensive education. CFPs must complete a college-level CFP Board of Standards-approved program in financial planning or qualifying equivalent.
Where a financial planner plans to work will dictate which licenses and certifications he or she will need. For example, if a financial planner wants to sell investment products, he or she will generally need to pass exams administered by the Financial Industry Regulatory Authority (FINRA).
What Makes A Successful Financial Advisor?
Financial advisors may possess certain traits that indicate that they are well versed in their field. Successful financial advisors have an extensive list of clients and a proven track record of premium service and performance. They also have an in-depth understanding of the financial market and undergo regular training to stay up-to-date with changes in the market.
Financial advisors who remain successful over time usually have a passion for financial planning and enjoy learning more about the industry. They understand the importance of budgeting and structuring an investment portfolio in a way that results in long-term wealth building. They are also able to communicate with prospects and clients in a way that shows their dedication and knowledge base.
What Is Wealth Management?
Wealth management is an advanced form of financial planning designed exclusively for high-net-worth clients. Common wealth management services include investment management, financial advice, estate planning, tax guidance and in some cases, legal assistance.
While anyone can benefit from financial planning, wealth management is often sought out by clients with large sums of money, assets and investments. To acquire wealth management services, a person usually needs to have at least $250,000 of investable assets. Some wealth management firms will only manage clients who have upwards of $5 or $10 million.
What Are The Requirements To Be A Wealth Manager?
Professional wealth managers offer financial advice to clients with a high net worth. A wealth manager may assist clients with account details, provide ongoing financial advice and help clients build or maintain wealth. To become a wealth manager, a person may have to acquire a bachelor’s degree in finance, management, economics or a related field.
Most places of employment require wealth managers to have some previous experience in financial services. These professionals are also expected to be analytical, possess strong mathematical skills, be able to understand complex information and have great presentation skills. Although becoming a wealth manager does not require any specific certifications, many managers are CFP(R) or CFA(R) certified.
What Makes A Successful Wealth Manager?
Successful wealth managers must be confident, have good negotiation and sales skills, and possess extensive knowledge of financial and wealth building topics. High performing wealth managers also have situational awareness. They understand that a person’s past and present have a direct impact on their future and will evaluate these areas when measuring risk tolerance and creating financial goals.
A successful wealth manager often offers clients more than just investment advice. They know that modern clients seek comprehensive services, such as risk management, tax advice and estate planning. They also get to know their clients and may advertise their services to particular niches.
What iIs The Best Option For You?
Choosing between a financial advisor and wealth manager should be based on the client’s unique financial situation. Clients with a high net worth and many investments and assets will usually benefit from having a wealth manager, while clients who need assistance with managing their money and have a lower net worth can benefit from working with a financial advisor.
Talk With The Wealth Management Vs Financial Planning Professionals
Money management is a complex topic that often requires the experience of a financial planner or wealth manager. Reach out to the financial planning and wealth management professionals at Campbell Wealth Management, Inc. to get started today.