While they share many similarities, the differences between a financial advisory and a wealth management position may shock you. Which career path you choose depends on how involved you would like to be in your client’s financial decisions. There is no one path that is necessarily better than the other, but this article aims to help you decide which path is right for you.
What Is A Financial Advisor?
Financial Advisors provide guidance on investments, insurance, taxes, retirement planning, and estate planning. They offer personalized advice on how to manage your money and reach your financial goals. They may also help you make decisions about investments such as stocks, bonds, mutual funds, and other securities.
A financial advisor plays a critical role in managing a person‘s financial well–being and helping them reach their financial goals. They are responsible for a wide range of tasks, from helping clients develop and implement investment strategies, to providing advice on retirement planning, tax planning, estate planning, and insurance.
Taking into account their current financial situation, financial advisors create a financial plan to execute for their clients. They are also responsible for monitoring their client’s investments and providing advice on how to best manage those investments in order to maximize returns. This includes helping clients assess their risk tolerance and develop an investment strategy that will allow them to meet their goals without taking on too much risk.
What Comes with a Wealth Management Position?
Wealth Strategists are similar to Financial Advisors in many ways. Like financial advisors, they also provide advice on general investment options, insurance, taxes, retirement planning, and estate planning. However, wealth managers and strategists go beyond basic investment advice and offer more holistic services such as budgeting and debt management.
They are better suited to handle complex financial situations that require more in-depth analysis and planning. For example, if someone has a high net worth or requires estate planning, a wealth manager may be needed.
Wealth managers have access to a wider range of investment opportunities than financial advisors. This can include private investments, hedge funds, venture capital, and real estate. This is why people with a higher net worth typically opt for someone in a wealth management position, than a typical financial advisor.
Wealth strategists work with clients to create individualized portfolios that meet their specific needs. They can often provide advice on alternative investments such as art, antiques, and collectibles, which are not typically available through a financial advisor role.
In addition, wealth managers may offer estate planning services such as setting up trusts and wills, tax planning strategies, and risk management. They may also provide advice on philanthropic giving and other charitable activities which can help reduce their client’s tax burden.
The Main Difference Between a Financial Advisor and a Wealth Management Position
Financial advisors are regulated by the U.S. Securities and Exchange Commission (SEC) and state securities regulators. These regulations protect investors from fraud and other investment-related misconduct. Financial advisors must adhere to a fiduciary standard, which means they must always act in their client’s best interests when providing advice or making recommendations about investments, insurance, taxes, retirement planning, estate planning, or any other financial matters.
Wealth managers are not subject to the same regulatory requirements as financial advisors because they do not manage investments on behalf of clients. Instead, they may provide general advice on which investments to consider, but typically do not have discretion over clients’ accounts and therefore are exempt from SEC regulations that apply to registered investment advisors (RIAs).
The main advantage of wealth managers not being regulated by the SEC is that they have more flexibility in their services. Unlike a financial advisor role, those in a wealth management position can provide customized advice on a broader range of topics such as budgeting, debt management, and estate planning. They also have access to alternative investments such as private equity funds, venture capital, and real estate, which are not typically available through a financial advisor.
Wealth managers are also able to provide more personalized advice because they are not bound by the same fiduciary standards that apply to registered investment advisors. This means that they can take into account an individual’s unique circumstances when providing guidance on investments or other financial matters. Custom financial and investment planning is often more valuable to higher net-worth clientele.
Is a Wealth Management Position a Good Fit For You?
Wealth strategy and management is a great career choice for those who want to provide more personalized financial advice and services. These strategists are not subject to the same regulatory requirements as registered investment advisors, so they have the freedom to create customized solutions for their clients. Wealth management positions are a great choice for those who want to be more involved with diversified portfolios. While both positions are great options, many people feel that wealth management is more rewarding.
A notable setback of working strictly as a registered financial advisor is that the government has regulations on how much you can charge your clients and for which services. Since wealth managers are not bound by the SEC, these businesses have more flexibility in their pricing and are able to allow their wealth manager staff to work with larger investments, which usually means more money earned.
Through a pricing structure known as Assets Under Management (AUM), wealth managers can set rates based on the value of the asset investments being managed. Where a Financial Advisor is limited in which types of investments they can manage, someone in a wealth management position has broader options and can earn more by managing more assets and investments.
Making The Choice
No matter which of these positions you feel suits you, we are confident it will be fulfilling. Both financial advisory and wealth management positions tend to pay well and are equally valid career paths to choose from. Which one is right for you, ultimately will come down to what you are passionate about, what your goals are, and how it aligns with your personality.
If you are curious about a career in financial advice or wealth strategy, there may be open positions available at ProVision Wealth. Click here to see what is available!