It really drives me nuts when financial planning and wealth management are used interchangeably, because the two disciplines require different skill sets and are appropriate for different people. In a nutshell, a financial planner will accompany you on your trek up the mountain — toward financial independence — while a wealth manager resides on the summit, helping you preserve your wealth and your happiness. Put another way, a financial planner strives to help you achieve your hopes and dreams, and a wealth manager, for the most part, focuses on helping you maintain those dreams.
I could stop here, since I’ve made my point, but there’s plenty more to consider as you think about your own needs — where you are in your life journey.
The Role of a Financial Planner
In an ideal situation, you begin working with a financial planner once you start making an income. That person — particularly someone who’s gone through the CERTIFIED FINANCIAL PLANNER™ professional process — helps you make smart decisions as you plug away toward incremental goals like buying a home and sending kids to college as well as your ultimate goal of what you want retirement to look like.
Frankly, financial planning is much more fun than wealth management in my opinion, because it’s where the heavy lifting takes place. For me, it’s a lot more rewarding to help people climb the mountain than simply welcome them when they get to the top. Financial planners are involved at all different phases of clients’ lives — helping with everything from savings and investment allocation, tax planning, and estate planning to budgeting and risk management via insurance. There should be a constant back and forth between you and your financial planner, as well as your tax and legal advisors, as you plan for the incredible achievement of having enough assets to support your lifestyle.
The Role of a Wealth Manager
Those who focus solely on wealth management are dealing with a different animal. Their clients are often already wealthy — they’re at the top of the mountain — so they may worry about different things than those who are still climbing. First and foremost on their minds is ensuring they maintain their wealth, so wealth managers are tasked with helping ensure they don’t make decisions that might harm their family down the line.
Wealth management clients are concerned with asset protection, tax planning, estate planning and legacies. They also have the burden of not “ruining” their children by simply gifting them with money — something that often dulls their ambitions and prevents them from reaching their full potential. Wealth managers may be thought of as happiness advisors, since they often deal with people who realize what they value most at this point in their life is time; money is not the be-all and end-all.
Who Do You Need?
Whether you should be working with a financial planner or wealth manager could be determined by where you are in your climb. If you’re fortunate, you find someone who has financial planning in their DNA, but the experience to continue to advise you once you reach your summit. We’re fortunate to have many such individuals at WorthPointe, including me. We consider it an honor to help our clients live great lives — based on their unique dreams.
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