Both financial planning and wealth management are highly coveted careers for bright finance graduates. However, which one is right for you?
Financial planning focuses on goal setting, budgeting, savings and investment advice. Wealth management is more comprehensive, incorporating a range of services like investment management, tax optimisation and estate planning. Contact Clark Wealth Partners for more information.
What is Financial Planning?
Financial planning is a process of setting financial goals and developing strategies to achieve those goals. The goal is to provide a clear blueprint for managing money over time that can help individuals make the most of their assets. A financial planner is a great option for anyone looking to improve their finances, whether they are saving for retirement, buying a home, or paying down debt.
There are several factors to consider when choosing a financial planner, including their credentials, experience, and fees. It is important to find a professional with appropriate education and licenses to work in your state. You should also look for someone with a track record of successful client outcomes. It is also a good idea to choose a planner who offers the services you need at an affordable price. Financial planners typically charge hourly rates or a flat fee, while wealth managers may charge a percentage of assets under management or an annual fee.
Unlike financial planning, wealth management involves a broader range of tools and strategies and is generally tailored to high-net worth clients with complex needs. However, it can be used by individuals of all income levels who are looking to optimize their financial health through comprehensive strategies for asset growth and preservation.
A financial plan can be a powerful tool for business owners, as it provides an overview of how funds are allocated across departments and identifies any areas that need improvement. This can lead to improved productivity, revenue, and long-term stability.
In addition, comprehensive financial planning can help businesses save money by identifying opportunities to minimize expenses and reduce tax liability. It can also improve the visibility of how funds are deployed throughout a company, giving managers insight into how to make smarter decisions that support strategic objectives.
In terms of career paths, both wealth management and financial planning offer lucrative careers for those with the right skillsets. Individuals with a strong understanding of the market and a natural market for HNWIs can lean towards wealth management, while those who prefer more hands-on engagement with their clients may want to focus on financial planning. Either way, the key to success is networking and building trust.
What is Wealth Management?
Wealth management is a more comprehensive service than financial planning, catering to high-income earners and people with significant investable assets. It focuses on a client’s overall financial picture, providing a wide range of strategies and tools that can help them grow, protect, and transfer their wealth. Financial planning is a vital component of wealth management, but it also goes beyond savings and investment advice to incorporate more in-depth services like tax or estate planning, philanthropy planning, and business succession planning.
In addition to financial planning, wealth managers often offer a variety of other services like private banking, trust services, and even hedging derivatives for large blocks of stock. Generally speaking, wealth managers cater to wealthy individuals and families with investable assets of $1 million or more. They may be employed by large brokerage firms, banks, or independent financial advisors who specialise in wealth management services.
A financial planner is a good option for you if you are looking for a general overview of your finances, such as budgeting strategies, debt management, retirement or education funding, and risk mitigation strategies. A financial planner will assess your current financial situation, create a roadmap to achieve your goals and develop an investment strategy that aligns with your risk tolerance.
A financial planner typically charges an hourly or flat fee for their services, while a wealth manager might charge a percentage of the total assets they manage or a flat annual fee. If you’re interested in expanding your client base and offering a more holistic approach to managing their finances, pursuing a certification in wealth management is a great start. The distinction between these two services is important because it determines the type of clients you’re best suited for. The line can sometimes be blurred between the two, so it’s essential to understand the differences and how they relate to each other before making a career decision. You can find out more about the different types of wealth management services here.
How Can a Financial Planner Help You?
A financial planner is a knowledgeable advisor that can help you put together a plan to reach your goals, whether they are saving for retirement, paying down debt or leaving a legacy. Using a consultative process, they can glean the specifics of your situation and develop a strategy that uses multiple services to achieve those goals. This can include investing, financial planning, estate planning and even tax services. While the fees for these services vary, they typically revolve around a percentage of assets managed by the advisor.
Financial planning services typically start with a meeting to identify your goals and aspirations, including what you want to achieve and how you envision getting there. From there, your planner can help you create a timeline and a set of clear steps to take. They may also recommend certain strategies for reducing risk and bolstering your odds of success, such as diversification or income-generating investments.
Once your financial plan is in place, your planner can offer ongoing guidance to ensure you stay on track toward your goals. This can include re-evaluating your plan periodically, adjusting savings targets or re-examining your timeline. They can also assist with establishing a budget, tracking your expenses and creating clear, achievable goals that you can monitor and measure.
Some advisors bundle investment advice and financial planning services together and charge a single fee based on the amount of money you have invested with them. In addition, many advisors also bill separately for financial planning on an hourly basis or as part of a retainer, with the median cost of a standalone financial plan being $3,000, according to a Kitces survey.
When choosing a financial planner, be sure to consider their fee structure and conflicts of interest. For example, commission-based advisors are incentivized to sell products that earn them higher commissions, while fee-only advisors make money only from their clients and don’t receive any compensation from the companies whose products they endorse or sell. You can verify if an advisor is fee-only by using the Certified Financial Planner Board of Standards’ CFP lookup tool.
How Can a Wealth Manager Help You?
Wealth managers help high-net-worth clients address their unique financial needs through comprehensive services like investment management, estate planning, and tax strategies. They often work with a team of professionals including accountants, attorneys, and insurance agents to optimize the client’s overall financial strategy. When looking for a wealth manager, consider their fee structure and credentials. It is important to understand how they are paid in order to ensure transparency and alignment of interests.
Wealth management services often involve building and managing diversified investment portfolios that are aligned with each individual client’s risk tolerance, time horizon, and financial goals. This includes conducting market research, identifying growth opportunities, and making timely adjustments to the portfolio to capture gains while mitigating risks. It may also include setting up charitable giving strategies such as donor-advised funds or family foundations to minimize taxes and maximize the impact of philanthropy.
When choosing a wealth manager, look for those with credentials like the CERTIFIED FINANCIAL PLANNER professional (CFP®) or the CFA credential from the CFA Institute. You should also check their licenses to make sure they are registered with the Financial Industry Regulatory Authority (FINRA).
A good wealth manager will take time to understand your financial picture, including your goals and fears. They will also be aware of any family dynamics that could impact your decisions. This can be critical when addressing complex issues like estate planning, tax planning, and wealth transfer.
Many affluent individuals need help with complex, multifaceted financial matters that go beyond investment advice. The right wealth manager will be able to offer integrated services and help you navigate complicated issues. This can be especially helpful if you have significant assets that you need to manage or want to plan for the future.
A good wealth manager will have an in-depth understanding of the various facets of your financial life, from investments to estate planning and tax strategies. They can act as a quarterback to coordinate all of your financial services and help you achieve your long-term financial goals. They can also provide access to exclusive investment opportunities and specialized expertise that is not available to the general public.