Financial Advisors vs. Wealth Managers

By Jeff White | AUG 30, 2023

Wealth managers and financial advisors are two types of experts who can help you on your financial planning and investment journey. But while each of these professionals play similar roles, there are also distinct differences between them. It’s important to understand these differences, especially when deciding which one you should be working with that will help you with your goals. Technically, wealth managers are a subset of financial advisors that focus on high-net-worth clients, but deciding which one you should be working with might be more complicated than just that. SmartAsset’s free financial advisor matching tool can actually simplify the process of choosing the right advisor for you. 

What Financial Advisors Do

The term “financial advisor” has a relatively broad definition but it generally describes someone who’s an expert in the financial services industry and actively helps clients grow their wealth. Advisors often specialize in one or a number of areas, such as retirement, estate planning, taxes, investing and more. In turn, expertise and available services will almost certainly vary from advisor to advisor.

Financial advisors are ultimately selling their advice, skills and experience as a service. That means it’s entirely up to you to decide if an advisor is knowledgeable enough to be a good fit for you. Many advisors also work for large, recognizable firms, which can lend them even more credibility. Really getting a full understanding for who your financial advisor is as an expert can go a long way to having a successful relationship.

Many financial advisors have designations that indicate what expertise they focus on. Some popular choices are certified financial planner (CFP), chartered financial analyst (CFA), certified retirement counselor (CRC) and chartered financial consultant (ChFC). Advisors may have one certification, multiple or none at all. In addition, just about every advisor will have certain SEC certifications that legally allow them to invest clients’ assets.

What Wealth Managers Do

Wealth managers as a group also encompass a wide range of financial professionals. In fact, wealth management is technically a subset of the financial advisor industry that usually focuses their work on helping high-net-worth clients. They are often employed at wealth management-specific firms or family offices but can work at any financial advisory firm. 

Wealth managers tend to help clients with both investment management and financial planning. What separates them from some financial advisors is that they provide more comprehensive services. That means your wealth manager will typically watch over everything from your retirement plans to your portfolios to your insurance policies. They also may be specialized in certain areas of finance, though services can vary. Many wealth managers also hold certifications, but it isn’t a requirement of the profession.

The specific services offered by wealth managers will vary based on the type of manager or firm you choose to work with. For example, investment-focused wealth managers can help you manage your investment portfolio, but may offer less when it comes to estate planning. On the other hand, a planning-based wealth manager may be better for you if you want help managing your estate and retirement plan. But again, wealth managers tend to work with very wealthy clients, so it’s more common to see wealth managers who provide more comprehensive services.

Key Differences of Financial Advisors and Wealth Managers

Overall, financial advisors and wealth managers play similar roles, with both technically offering the same services to different types of clients. While offerings generally depend on the individual financial advisor or wealth manager, each typically provides clients with financial planning services, investment management services or both. Financial advisors and wealth managers also may hold similar financial certifications. 

While it’s not a rule, a major difference between financial advisors and wealth managers is the fact that wealth managers tend to work with high-net-worth, and often ultra-high-net-worth families. As a result, wealth managers may charge higher fees and provide more comprehensive services that blend investment portfolio management, financial planning and day-to-day money management. The average investor may not have a need for all of this help, though, making a general financial advisor a better fit in many cases.

Fees for wealth management services are almost always based on a percentage of a client’s total assets under management (AUM). This may lead to higher fees, especially for those who hold a lot of money with a wealth manager. Financial advisors may also charge a percentage of the AUM, but many will have fee arrangements geared toward those with smaller net worths.

For example, many financial advisors charge a set amount for one-off advisory services, like help planning for a financial goal. Paying for financial advice this way may be more affordable, albeit shorter-term. But if you need more help, asset-based fees are the norm.

Bottom Line

Since wealth managers may provide services to more exclusive clientele, you may want to consider working with a financial advisor if you don’t have a high net worth. Since financial advisors have broader services, you may have more luck finding what you’re looking for with them. Let’s say you’re looking for help meeting a specific savings goal for a specific purchase, like a home. A financial advisor may be better equipped to help you than a comprehensive wealth manager. However, at the end of the day, it’s up to you to decide whether a financial advisor or wealth manager is the right fit for you.

Tips for Investing

• When it comes to investing and managing your finances, it’s no secret that professionals can be a huge help. With so many moving pieces, it can really pay off to have a wealth manager or financial advisor in your corner. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Many people decide to take on their investment portfolios and financial planning goals by themselves, and that’s ok. SmartAsset has you covered with a range of different financial resources to help you manage your financial situation. For example, check out our free investment calculator today.

Photo credit: iStock.com/SDI-Productions, iStock.com/skynesher