Guide to Wealth Advisors & What They Do

By Inyoung Hwang · February 27, 2024 · 13 minute read

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Guide to Wealth Advisors & What They Do

Key Points

•   Wealth management advisors are professionals who offer personalized financial advice and services to individuals with significant assets.

•   These professionals assist clients with various aspects of their financial lives, including investment management, retirement planning, tax strategies, and estate planning.

•   Expertise in multiple areas, such as finance, accounting, and law, enables wealth management advisors to provide comprehensive guidance.

•   By closely collaborating with clients, wealth management advisors gain an understanding of their goals, risk tolerance, and financial situation to develop tailored strategies.

•   Engaging the services of a wealth management advisor grants individuals access to specialized knowledge, ongoing support, and a holistic approach to managing their wealth.

What Is a Wealth Advisor?

Wealth advisors are a subset of the greater financial advisor world, and they typically (but not exclusively) help high-net worth individuals or families manage their assets, and plan for the future.

There are many firms that offer wealth advisory services, including individual wealth management advisors running independent firms. And while their services often mirror or closely resemble those offered by others in the space — such as financial advisors or financial planners — the key difference is that a wealth advisor tends to offer those with high net worth holistic wealth management services.

Wealth advisors, or wealth management advisors, usually work with wealthy people or families with at least $1 million in liquid assets (i.e. not including property, businesses, trusts, and so on). Wealth management can be expensive, because the services are comprehensive, including but not limited to retirement planning, tax planning, estate planning, and investment management.

Wealth Manager vs Financial Advisor

Wealth manager, financial advisor, investment advisor, financial planner — there are many terms and titles in the financial services sector. Because of that, it can be helpful to know which specific type of financial service provider you’re looking for when you’re in need of guidance and advice.

Differences in 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 and your specific financial situation.

Wealth Manager vs Financial Advisor

Wealth Manager

Financial Advisor

Subset of financial advising Advise on financial plans or strategies
Usually work with high-earners or high-net-worth individuals Often sell products to earn commissions
Role is more comprehensive, and includes estate planning, tax consulting, and retirement planning Two common types: Financial Planners and Investment Advisors

What Do Wealth Advisors Do?

Wealth management is a subset of financial advising. Wealth managers tend to focus on managing the assets of high earners. 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.

It may be helpful to think of them as a quarterback with a team of professionals behind them, who can provide highly customized services and products.

They might place your assets in markets to enhance returns and shift them out when risk exceeds your comfort levels. Once the parameters are set, and the wealth manager understands your individual needs, you can focus your energy elsewhere.

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.

While wealth management is often thought of as a service only for the affluent, there are opportunities to get great advice, service, and solutions from a wealth advisor at very reasonable costs.

There 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.

đź’ˇ Learn more about investment risk.

Tax and Estate Planning

Wealth managers do not offer tax advice, but 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, and help avoid any surprises or legal snags for your family down the road.

Real Estate

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. Millions of Americans invest in real estate in one way or another — often by purchasing property, or shares of REITs — and choosing an advisor who can help with financial planning and real estate might make sense.

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.

How much do these professionals cost? Be aware that some financial advisors are incentivized to recommend certain investments based on the fees they can earn. So, your first step should be to understand which type of financial advisor you’re looking for, as well as what the advisor charges.

Many young investors might not have a good understanding of what financial advisors do. But the two most common types are financial planners and investment advisors.

Financial Planners

It may be easiest to 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 financial products, rather than just advice or guidance. Those can include insurance, stocks, mutual funds, and more.

Fee-only financial planners don’t sell products, however, as 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.

It’s always wise to ask how any advisor is being compensated, as taxes and fees quickly eat into profits.

Investment Advisors

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 advisors and review their credentials through a relatively simple internet search. Some financial planners are also Registered Investment Advisors (RIAs).

If you’re unsure of your advisor’s intentions, it’s always best to ask about their priorities before you start working with them. With an investment broker, for example, you’d want to know whether he or she has a fiduciary responsibility.

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How Much Does a Wealth Advisor Cost?

As noted, wealth advisors may charge their clients on a fee-only basis, or as a percentage based on the total asset management load. Ultimately, what clients end up paying will vary drastically based on how much they’re actually putting under management — so, the more a wealth advisor is managing, the more a client might pay.

Fees can vary widely, and as noted above, some advisors are compensated in more than one way. For fee-only or flat-fee wealth advisors, the fees generally land somewhere between $7,500 and can be as high as $55,000 per year.

The typical wealth advisor charging on a percentage basis will likely levy a fee between 0.6% and 1.2%.

The point is that it’s up to the client to ascertain how their advisors charge for their services so they know what they’re paying, and what they’re paying for exactly.

Pros and Cons of Having a Wealth Advisor

Whether the expenses of hiring a wealth advisor, along with the hassle of finding the right person, may prove to be worth it in the end, there are no guarantees. As such, there are pros and cons to hiring a wealth advisor.

On the upside, wealth advisors can shoulder some of the burden of financial decision making, and properly manage one’s assets — which, if you have a lot to manage, can become like a full-time job in and of itself.

Wealth advisors can also act as a sounding board for clients to bounce ideas or strategies off of, offer support during difficult times (death in the family, etc.), and have plans and contingencies in place in case things don’t go to script.

As for some of the potential cons, it’s hard to overlook the expense. If you have a substantial amount of wealth, a 1% management fee can easily amount to tens of thousands of dollars every year.

For some people, it may be worth looking into automated investing platforms rather than hiring a professional. Automated investing, or robo advisors as they’re sometimes called, can be a low-cost way to manage a pre-set portfolio of exchange-traded funds (ETFs). These services are more limited however, and may be more suited to investors with fairly straightforward goals and situations.

It’s also important to note that not all wealth advisors act as fiduciaries, and may be looking to benefit themselves more than you as a client.

4 Tips for Choosing a Wealth 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 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 the Type of Wealth Advisor for You

Again, 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 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 winnow your choices.

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 of assets.

2. Research Their Credentials

It’s never a bad idea to do some background research on a professional you’re planning to hire, and the same logic applies to choosing a wealth management advisor. Specifically, that means looking at things such as:

•   How many years of experience they have

•   What types 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. The regulatory body known as FINRA, for instance, has a BrokerCheck Tool that allows you to explore the backgrounds of investment advisors who are registered with the Securities and Exchange Commission (SEC).

You can also look at registration information from the SEC, and your state’s securities agency.

3. How Much You Can Afford to Pay?

Not every advisor’s fee schedule will work with your budget, so 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. A brochure is essentially a condensed version of Form ADV (which is used by advisors to register with federal and state securities authorities), 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.

It may also be helpful to cast a wider net and look beyond traditional advisors. Using an online platform like SoFi Invest, for example, allows you to benefit from professional investment guidance without paying commissions, or advisory fees, but other fees apply.

4. Which Questions to Ask

Before committing to a wealth management advisor, take the 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? (To determine 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?

There’s no right or wrong answer as to whether you need a wealth management advisor — it really comes down to whether you feel hiring one would ultimately be worth the expense, and take the burden of managing your assets and finances off of your shoulders.

Since wealth advisors tend to work with wealthier clientele, they often do provide those clients a valuable service.

That said, if you’re in a lower income bracket or don’t have a vast array of assets to stay on top of, another type of financial advisor may prove to be more beneficial. It really comes down to your specific situation, goals, time horizon, and budget. You can also check out SoFi’s Wealth Investing Guide to try and gauge your needs too.

The Takeaway

Wealth management advisors can help you navigate unforeseen hurdles and ease your investing worries. Plus, they can be a great asset when defining your financial goals, among many other things.

Hiring a wealth management advisor has its upsides, like having someone to discuss strategy with, and to help you keep a cool head and make wise financial decisions during trying times. But they can have their downsides, too, and can be expensive.

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FAQ

Is a wealth advisor worth it?

A wealth advisor is worth it if the client feels that the amount they’re spending on the advisor’s service is getting them what they want. While a wealth advisor may not be worth it for everyone, depending on how wealthy you are, an advisor’s services could be invaluable.

What is the difference between a wealth advisor and a financial advisor?

A wealth advisor is a type of financial advisor, but one who tends to work with wealthier or high-earning clients, and who work to provide custom solutions to their clients’ wealth management issues. They’re more specialized, in many ways, than a financial advisor.

How rich do you need to be to have a financial advisor?

There’s not necessarily a minimum net worth needed to work with a financial advisor, but as a general guideline, once you have around $50,000 in assets, it may be a good idea to get in touch with one and explore the services they offer.


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