You may think that a Wealth Manager and Financial Advisor are the same thing, but a closer look at the distinctions reveals some important differences.
Listen now and learn:
- What it means to be a Wealth Manager
- How to know if you’ve outgrown basic financial advice
- The most important thing to keep in mind when looking for an advisor
Listen Now
Show Notes
I’m in the middle of a week dedicated to introductory calls with people interested in becoming a client of Plancorp where I serve as Chief Investment Officer.
While I carved out time exclusively for these calls with people on my email list, you can still always book a time to speak directly with me about becoming a Plancorp client by navigating to the Work With Me page.
In Episode 66, I went through 6 questions people don’t ask their financial advisor but should. So I’m not surprised that people scheduling calls have been asking some of those questions of me.
The more surprising question, though, is: What’s the difference between a Wealth Manager and a Financial Advisor?
At Plancorp, our lead advisors are Wealth Managers. And while the terms might seem interchangeable, there are some important differences in the approach, services, and philosophy.
Wealth Managers Are Proactive and Go Beyond Basic Advice
Wealth managers are proactive financial professionals who thrive on handling any level of complexity. Creating a financial plan and providing investment management is part of this process, but wealth managers also consider other major intersections between life and money.
With full insight into your personal goals, values, and complete financial picture, wealth managers constantly look for opportunities to help you build wealth and make the most of it. That might mean suggesting better investment strategies, analyzing different ways to reduce taxes, putting together a strong estate plan, or flagging potential issues and challenges before they arise.
Financial Advisors are more reactive when going beyond basic advice. Even if an advisor offers additional services beyond investment management — such as tax planning or advice on charitable giving — they’re likely outsourcing that work to someone else with little visibility. As a result, they may wait for you to bring up potential tax planning and investment ideas.
Financial advisors also tend to be asset gatherers — looking to bring as much of your money under their management as possible, and not necessarily because it’s best for you. I share a case study in the episode if you want to tune in.
When to Hire a Wealth Manager Over a Financial Advisor
The more assets you have, the more complex your financial life becomes and the more value you can get from a wealth manager.
Financial complexity can take many forms, but here are a few situations when you might benefit from working with a wealth manager:
- You have a large estate and need to develop plans to reduce your estate tax burden.
- You’re a business owner or a professional with equity compensation who needs advice on maximizing wealth through tax-efficient strategies.
- Your financial picture has changed due to sudden wealth or a major life transition, such as an inheritance or divorce settlement, and you need a comprehensive approach to the myriad decisions that come with a major windfall or transition.
- You’re tired of having to nudge your advisor to think bigger or look ahead to what comes next, and you appreciate the power of delegating to a proactive partner.
It’s in the name: An advisor is there to give advice; a manager proactively takes on more with ease.
Many of our new clients come to us feeling that they outgrew basic financial advice. It may have served them well early on, but there’s no shame in adjusting to a better fit.
You might think that the additional services and personalized approach mean that wealth managers are more expensive than financial advisors, but in most cases, they are not.
Financial advisors and wealth managers have similar fee structures, typically charging a fee based on the percentage of your assets that they manage. So even though you’re paying the same percentage, you typically receive more dedicated attention and additional services when working with a wealth manager.
Just remember, you want to work with someone acting as a fiduciary at all times.
A fiduciary is a financial professional who is legally required to make decisions in a client’s best interest.
I talk about this in greater detail in Episode 26: Not All Financial Advisors Are Created Equal.
Resources
- EP.24: Do it Yourself or Hire an Advisor?
- EP.26: Not All Financial Advisors Are Created Equal
- EP.28: How to Interview an Advisor
- EP.66: 6 Questions People Don’t Ask Their Financial Advisor, But Should
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About the Podcast
Long-term investing made simple. Most people enter the markets without understanding how to grow their wealth over the long term or clearly hit their financial goals. The Long Term Investor shows you how to proactively minimize taxes, hedge against rising inflation, and ride the waves of volatility with confidence.
Hosted by the advisor, Chief Investment Officer of Plancorp, and author of “Making Money Simple,” Peter Lazaroff shares practical advice on how to make smart investment decisions your future self with thank you for. A go-to source for top media outlets like CNBC, the Wall Street Journal, and CNN Money, Peter unpacks the clear, strategic, and calculated approach he uses to decisively manage over 5.5 billion in investments for clients at Plancorp.
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