Often day-to-day tasks take up so much of our focus, we might not be spend enough time thinking about the big picture. Like, will you have enough to retire well—or, even better— retire early?
Will you live your golden years in a resort beach town or choose to live near the mountains? Or if you have entrepreneurial aspirations, should you open a winery or a little tech startup that you hope will hit it big? Those are all life-sized questions that need comprehensive answers.
It’s never too early, or late, to start planning for your future. Actively planning for retirement is one of the smartest decisions you can make when it comes to meeting your financial goals. You wouldn’t put off seeking medical care for health issues, so why would you put off thinking about the financial health of your future?
Financial planning can be overwhelming and there are a lot of options to consider if you’re looking for some guidance when establishing a plan for retirement. One option is to invest with a wealth advisor (or manager), who can help hone your financial strategy.
Wealth Manager vs Financial Advisor
Wealth manager, financial advisor, investment advisor, financial planner—there are so many options, and terms, and titles. When you’re looking for financial advice, navigating the professional landscape can seem confusing.
Certifications and licenses are one of the reasons there are so many terms and titles used to describe people who provide advice related to personal finances. So it pays to do a little research to determine who would work best for you.
What Do Financial Advisors Do?
Financial advisor is the broadest of the terms. The phrase can describe anyone who advises you on a financial plan, investments, or tax strategy implications. Be wary, though: some financial advisors are incentivized to suggest certain investments for commission purposes. So your first step should be to understand which type of financial advisor you’re looking for.
Up to 46% of millennials don’t have a good understanding of what financial advisors do. But under that big umbrella of financial advisors, the two most common types are financial planners and investment advisors.
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Think of financial planners as “lifestyle planners.” They’re most suitable for helping you set up a budget, plan for tax time, save for retirement, or to plan your child’s college education. They should have completed professional requirements for their CERTIFIED FINANCIAL PLANNER™ practitioner designation.
Some, usually in larger companies, earn their keep by selling you products: insurance, stocks, mutual funds, and the like. Fee-only financial planners don’t sell products; they’re paid for their advice—per hour or at a certain rate. Fee-based planners may charge a fee but also may earn a commission from certain products, like mutual funds.
Investment advisors also encompass a range of financial professionals. Probably the biggest difference between a financial advisor and an investment advisor is that a Registered Investment Advisor has a fiduciary responsibility to put his or her client’s interests first. And as the name implies, they must register with the SEC, and are subject to various oversight and record keeping rules, among other obligations.
You can even look up individual people, so you can review their credentials . In fact, some financial planners are also Registered Investment Advisors.
If you’re unsure of your advisors intentions, it’s always best to ask about their priorities before you start working with them. With a broker, for example, you’d want to know whether he or she has a fiduciary responsibility to you or if he or she is selling the latest trending stock for commission.
What Does a Wealth Management Advisor Do?
Wealth management is a subset of financial advising. A wealth manager comes with the caveat that they focus on managing the assets of high earners. Think of them as a quarterback with a team of professionals behind them who can provide services and products. They usually have a big picture view of all your assets, from your retirement fund, to your real estate investments.
Think of them as consultants whose main objective is to provide a customized solution for you. They might place your assets in markets to enhance earnings and shift them out when it’s risky. Once the parameters are set, and the wealth manager understands your individual needs, you can focus your energy on other aspects of your life. If you think wealth management is only for the affluent, there are opportunities to get great advice, service, and solutions from a wealth advisor at very reasonable costs.
A wealth manager’s role is generally far more comprehensive than offering just investment advice. While investment advisors and financial planners focus on one piece of your financial situation, wealth managers combine several areas of financial guidance.
They are able to provide financial advice that addresses the entirety of a person’s financial life; including investment management, accounting and tax strategy consulting, estate planning, retirement planning, and more. They work closely with you to establish a plan to grow and maintain wealth. Here are three areas a wealth advisor can help you:
Investment Management and Risk Management
A wealth advisor will work with you to assess your tolerance for risk and then provide an investment strategy to help you reach your financial goals. For example, if you’re beginning to plan for retirement early in your career, you may be more apt to take on risk than someone who may be nearing the end of their career and is much closer to retiring.
Part of any investment plan also includes managing risk over time. This includes having adequate insurance for your financial investments and diversifying your portfolio to minimize risk.
Tax and Estate Planning
What does a wealth management advisor do when it comes to your taxes? While wealth managers do not offer tax advice, they can often coordinate with your attorney or accountant to strategize and minimize the taxes you owe by planning for tax efficiency.
Many wealth advisors can also help with estate planning strategies. Estate planning often involves more than just wills. For instance, there are advantages for setting up trusts, especially if you have dependents that will need caring for. Working with a wealth manager for estate planning can help get your affairs in order to avoid any surprises for your family down the road.
If you own investment property, this is where the wealth manager vs financial advisor debate will be quite impactful. Wealth advisors usually have more experience and skills to help you manage portfolios with valuable real estate. Since approximately 30 million Americans have invested in real estate , choosing an advisor who can help with financial planning and real estate might make sense.
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Tips for Choosing a Wealth Management Advisor
If you’re interested in working with a wealth management advisor, it’s important to research options carefully before making a decision. Meeting with different financial professionals virtually or in-person can give you an opportunity to ask questions about their background, experience and services, as well as the fees they charge.
These tips can help with selecting an advisor that meets your needs and goals as well as your budget.
1. Determine which type of wealth management advisor you need
As mentioned previously, wealth management advisors aren’t identical when it comes to the types of clients they work with and the advisory services they offer. So it’s important to consider which one is best suited for helping to guide money decisions.
A wealth management advisor can help you with financial-market investment guidance, some may specialize more in taxes, real estate investments, or estate planning.
Clarifying what you need and want from an advisor, based on where you are financially and where you want to end up can help narrow down the field when deciding whom to work with.
It is also important to know who the typical clientele of the wealth management advisor you are considering is. For instance, some advisors may prefer to work with clients who have a certain level in assets.
2. Research an advisor’s credentials and background
You likely wouldn’t choose a mechanic or a landscaper without first checking out their track record and reputation, and the same applies to choosing a wealth management advisor.
It’s important to research a wealth management advisor’s background. Specifically, that means looking at things such as:
• How many years of experience they have
• What type of clients they typically work with
• What professional certifications or licenses they hold, if any
• Whether they’ve ever been the subject of any disciplinary or legal action
There are several tools you can use to research a financial advisor’s background. FINRA’s BrokerCheck Tool
, for instance, allows you to explore the backgrounds of investment advisors who are registered with the Securities and Exchange Commission. You can also view registration information using the SEC’s Investment Adviser Public Disclosure website. Your state securities agency may also have tools for researching an advisor’s past history.
3. Consider how much you can afford to pay a financial advisor
Financial advisors, investment advisors and wealth management advisors don’t work for free. They all expect to be paid for their services and it’s important to find one that fits your budget. Again, this is where it’s critical to know the distinction between fee-based and fee-only to understand how advisors structure their fees and what you’ll pay for their services.
You should be able to get a sense of what an advisor charges by reviewing their client brochure or their Form ADV . The brochure is essentially a condensed version of Form ADV, which details the services an advisor offers, their fees, where they operate, any potential conflicts of interest that exist and past disciplinary or legal actions they were subject to, if any. You may be able to find both their Form ADV and their client brochure on an advisor’s website but they’re also required to furnish you with a copy upon request.
When weighing the costs of getting professional financial advice in the balance, it may be helpful to cast the net wider and look beyond traditional advisors. Using an online wealth management platform like SoFi Invest, for example, allows you to benefit from professional investment guidance without paying commissions, management fees or annual fees.
4. Ask the right questions
Before committing to a wealth management advisor, take time to interview them first. This vetting process can help with making a final decision about whether you want to pursue a professional relationship.
During this process, you should ask questions about their background and services. Specifically, consider posing these questions to any advisor you’re thinking of working with:
• How long have you been a financial professional?
• What certifications do you hold?
• Which financial advisory services do you offer?
• How are you paid for those services?
• Are you a fiduciary financial advisor?
• What type of client do you typically work with?
• What is your approach to or strategy for financial planning?
• How do you typically communicate with clients?
• Will I work with anyone besides you? (If the advisor is part of a financial services firm.)
• Do you have any potential conflicts of interest?
• Are there any past legal or disciplinary actions on your record?
Do I Need a Wealth Management Advisor?
Wealth managers can help you navigate unforeseen hurdles and ease your investing worries. Plus, they can be a great asset when defining your financial goals.
If you’re ready to prioritize investing, and want some guidance, consider opening a SoFi Invest® account. SoFi offers an Active Investing platform, where investors can buy stocks, ETFs or fractional shares. For a limited time, funding an account gives you the opportunity to win up to $1,000 in the stock of your choice. All you have to do is open and fund a SoFi Invest account.
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