In their financial journeys, many people may question, “What’s the difference between wealth management and financial planning, if there even is one?”
The terms are often used interchangeably. The truth is, though, that financial planning is just one key component within an all-encompassing wealth management strategy. Your wealth management strategy is a framework that defines how you will achieve, grow, sustain, and distribute your wealth. It is often tailored to the individual’s specific needs and includes various elements such as investment management, tax planning, estate planning, and, yes, financial planning.
Financial planning is a process that helps you make the most of your money by taking account of all aspects of your finances to work towards your goals in the near future while aligning with your long-term goals. Wealth management is a holistic financial service tailored for individuals and families with higher net worth.
Ultimately, wealth management focuses on preserving and growing your wealth once it is achieved, while financial planning focuses on short-term goals to help you achieve long-term wealth. Still, both are equally important in creating and preserving a financial legacy and achieving lifelong goals.
Why Is the Difference Important?
It’s important for everyone to understand the difference between financial planning and wealth management.
Viewing financial planning on its own as the core of the success of one’s personal and financial goals leaves room for risk in many other aspects that play a significant role. This includes investment and retirement planning, tax planning, charitable giving, gifting/lending, and estate and legacy planning. Neglecting the other pillars of an overall healthy financial future notably reduces the probability of achieving significant wealth over time.
Simultaneously, neglecting financial planning within a comprehensive wealth management strategy is detrimental to the sustainability of wealth.
Furthermore, the two focuses require different sectors of professional help.
Wealth management is typically geared towards individuals and families with a significant amount of assets—or achieved wealth—and requires specialized advice and services to continue to manage and grow said wealth. They are focused on making successful long-term investments, generating generational wealth, and proper tax planning.
On the other hand, financial planning focuses on helping individuals and families create a plan for meeting their short-term financial goals. This may include budgeting, saving, investing, and retirement planning, all of which will help them work towards their long-term wealth management or develop a large sum of assets and money in the long term.
By understanding the difference between these fields, individuals can better choose the right professional to assist them with their unique financial needs and goals.
Wealth Manager Vs. Financial Planner
A financial advisor assists you in many aspects of your financial life.
They might explain how much life insurance you need or how much you should save and invest to retire. Ultimately, a financial advisor helps you manage your current finances to achieve your short-term goals while keeping the long-term in mind.
A wealth manager is typically defined as a professional who is investing and managing your money—buying and selling bonds, stocks, ETFs, and more while overseeing your overall financial legacy.
A wealth manager might be a good option if you’re looking to manage and grow your already acquired wealth—someone who frequently invests, earns a salary in a higher tax bracket, has multiple income streams, etc.
A financial planner may be a better option if you’re someone who is earlier on in their journey of working towards your long-term goals—someone who is starting their career, saving for a house, or learning to budget.
IMAFS Is Here to Help
If you’re seeking the guidance of a fiduciary CFP® expert to design a personalized investment plan that aligns with your financial objectives, TrueNorth Wealth is available to assist you.
TrueNorth Wealth is one of the leading wealth management firms in Boise, Salt Lake City, Logan, and St. George. Our primary focus is on helping our clients create long-term wealth while deriving maximum pleasure from their finances. We achieve this by pairing our clients with a committed CFP® professional, who is backed by an exceptional team.
At TrueNorth, we believe in more than just money. We’re dedicated to serving families throughout Utah and aiding them in achieving independence and flexibility in their lives. To find out more or to arrange a consultation at no charge, please get in touch with us.