Financial planning and wealth management are often used interchangeably, but there are some subtle differences between the two. In order to help determine what kind of help to seek, or what kind of professional to reach out to, understanding the difference between financial and wealth management is a solid place to begin.
Financial planning is a very broad term that encompasses all aspects of your financial life, from budgeting to retirement savings to estate planning. Wealth management, on the other hand, typically refers to services that are specifically tailored for high-net-worth (HNW) individuals. There are many more similarities between financial planning and wealth management than there are differences.
It’s important to understand exactly how these terms differ so you can find the right financial advisor in Bountiful, UT, for your needs. ARS is here to provide ongoing trusted advice.
Here’s what we think you should know:
What is financial planning?
Financial planning is a process that helps you make the most of your money, whether it’s for short-term goals like saving up for a wedding or long-term plans like retirement. It involves taking into account all aspects of your finances so that they align with your goals. Financial planning is a long-term process that often requires changes to be made to an individual’s lifestyle in order to achieve their desired outcome.
For example, if someone wants to retire at age 50 but currently has $50,000 in debt and no savings, then they will need to find ways (such as cutting back on spending) in order to reach this goal by their preferred date. The goal of financial planning is not only making sure that you have enough money at any given time within the parameters of your budget — but also ensuring that there are no surprises along the way.
What is comprehensive financial planning?
Comprehensive financial planning is the process of creating a blueprint for your future. A comprehensive financial plan is a road map that helps you navigate through life’s twists and turns. It helps to define where you are now, where you want to be in the future, and how to get there.
When it comes to making decisions about your finances, comprehensive financial planning gives you the tools needed to make better decisions on an ongoing basis by considering all aspects of your current situation (including cash flow, savings etc.), along with any goals or issues that may arise in the future (such as saving for retirement). Comprehensive plans typically cover many areas including:
- Cash flow analysis
- Asset allocation
- Retirement income security analysis
- Health care insurance coverage
- Estate planning
- Tax minimization strategies
What is wealth management?
Wealth management is a service that helps high-net-worth (HNW) individuals and families with their financial needs. It’s an umbrella term used to describe all financial services provided by a team of experts. The wealth manager coordinates the work of their team to serve the client’s individual goals. Their services can include investment management, tax planning, and estate planning.
A professional advisor may have clients with $100,000 to $5 million in assets while a private wealth advisor may work with clients who have upward of $20 million or more.
Income of clients: Wealth managers help HNW individuals
- The main difference between financial planning and wealth management is the clientele
- Wealth managers are more experienced in dealing with high-net-worth individuals than financial planners, which means that they tend to have a higher income than their peers
- Wealth managers also have more experience in dealing with complex financial situations and complex tax situations because they work with a client base that often has large assets, incomes, and investments
- Wealth management solutions usually aim to support family members that a client wants to pass their wealth onto
Deeper involvement in asset management for HNW individuals
The wealth management industry is one of the fastest-growing fields in financial services. Wealth managers offer personalized, comprehensive financial planning advice to HNW individuals and institutions. In addition to conducting comprehensive financial analysis and creating investment portfolios that align with your goals, they can also help you with investment selection and management.
Financial advisers who focus on wealth management are typically more involved in asset management than those solely who focus on financial planning. They are often able to provide advice on investment strategy in addition to investment selection and portfolio management.
Broader catalog of services are offered by wealth managers
The biggest difference between financial planners and wealth managers is their focus on helping clients with a broader range of services. Wealth managers are more focused on helping clients with the entirety of their financial planning needs, from investment advice to estate planning and everything in between.
If you are looking for an advisor to help with financial planning or wealth management, we can help you find the right professional to best serve your needs.
Financial planning is a process that helps individuals set and achieve financial goals. The wealth management services provided by ARS include helping HNW individuals and families to manage their finances and investments while providing advice on complex matters such as estate planning, tax strategies, and business succession plans.
The Takeaway
“Wealth is the ability to fully experience life.” — Henry David Thoreau
This sentiment speaks to the connection between wealth management and financial planning. Wealth managers help individuals invest in experiences, rather than just material goods. Wealth managers do this by helping clients set goals and allocate resources around their values, which include both financial and non-financial components of their lives.
Clients who have a clear view of what they care about are more likely to stick with a long-term plan and keep from making impulsive decisions that might derail their progress towards achieving those goals. As you can see, wealth management is not only about managing money—it’s about managing life!
Reach out for asset and wealth management support from the CERTIFIED FINANCIAL PLANNERS™ and wealth managers at ARS.
