When searching for a financial professional, you may wonder whether you need asset management vs wealth management. How are they different?
Advisory firms offer a range of services and may specialize in one area too. There are also many synonyms for financial advisors which makes it hard to find what subtle differences may exist.
While there is not a formal definition, here’s how we view the differences between asset management (investment only), financial planning only, and wealth management services.
Infographic: Asset Management vs Wealth Management vs Financial Planning
Do I need a financial advisor or wealth manager?
It’s a difficult question as titles are used interchangeably. Of course, that doesn’t mean all financial professionals are the same – far from it. As you consider which advisor is best for you, consider advisor compensation, certifications, and credentials in your decision.
Fee-only wealth management
A fee-only financial advisor is only paid by their clients; they do not sell financial products (like insurance or mutual funds) and they do not receive commissions. Fee-only advisors also don’t accept compensation from third parties, like referral fees or other sales revenue.
Fee-based financial advisor
Fee-based advisors are paid by client fees and commissions for selling financial products and securities to their clients. The commissions on these products can be substantial which can create concerns about conflicts of interest. This type of advisor can also receive referral fees and other third-party revenue.
Anyone can hold themselves out as a financial planner
There is no education or licensing requirement to be a financial planner. However, to make securities recommendations or sell insurance, licensing is necessary. Requirements depend on the governing body (e.g. state vs SEC and Finra) and the type of advisory business.
Since anyone can hold themselves out to be a financial planner or advisor, additional credentials can help you compare advisors’ qualifications. For example, the CERTIFIED FINANCIAL PLANNER™ professional designation is typically considered the “gold standard” for financial advisors. Similarly, the Chartered Financial Analyst® designation is top tier for asset management.
Learn more about our team of CFA and CFP® professionals.
Registered investment advisors must act in your best interest
A fiduciary duty always requires an advisor to act in the client’s best interest. Registered investment advisors are fiduciaries, so they’re must always put their clients’ interests ahead of their own. This is the highest standard of care under the law.
Many fee-only financial advisors are registered investment advisors (and fiduciaries). But it is possible for a firm to be one and not the other. As such, you’ll want to understand when your advisor is (or isn’t) working in your best interest.
Independent financial advisors
Independent wealth management firms and financial advisors have no affiliations or allegiances to a particular fund family or financial product. Advisors affiliated with a bank, wirehouse, or large asset manager might not be able to make an independent recommendation.
Consider, for example, if you walked into a Bank of America branch and asked for the best type of savings account on the market. As you’d expect, they’re going to recommend one of their products.