Financial Advisor vs Wealth Advisor vs Investment Advisor:
What's the Difference?
If you have made the decision to begin working with a financial professional, you may be asking yourself: “Which type of financial professional is the right fit for me?” Should you work with a "financial advisor" or an "investment advisor" or a "wealth advisor?" It is of paramount importance to understand the difference between the three. You should know the differences between each category of financial experts before committing to a long-term engagement. According to the CFP Board, “consumer use of financial advisors has increased significantly in the last five years,” going up approximately 10 percent in the span of just five years.1
When surveyed about the benefits of cash flow management and budgeting, nearly 100 percent of advisors stated their clients became MORE confident and secure about their financial futures after working with a professional.2 However, “consumer use” does not necessarily mean every age group of consumers is jumping on the bandwagon. The Society of Actuaries found that “only 52 percent of pre-retirees and 44 percent of retirees consult a financial planner or advisor.”3 Before you make a final decision, we’ve rounded up some of the key differences between each group so you can pick a professional with confidence.
The most used term, a financial advisor is someone who has a general knowledge of most personal finance concepts and helps you with different aspects of your financial life. This might include planning for retirement, investment advice, life insurance, retirement savings strategies, budgeting, and more. Every financial advisor is different in what specific services they provide, so it is always best to ask if you are looking for help in one area.
An investment advisor is a professional who focuses on just that - investments. An investment advisor will manage your portfolio with the goal to get the highest rate of return that you can over the long run. Before they begin designing your portfolio, investment advisors should evaluate your current financial picture, as well as determine your optimal risk tolerance, which may involve you filling out a questionnaire.
After discussing your needs and goals with your advisor, they typically will then present an investment strategy tailored according to the unique aspects of your life. Some investment advisors actually manage your money and do the investing for you, others simply "advise" on what you should do and leave you to implement the strategies on your own. It's important to note that many investment advisors' advice comes in a vacuum or silo. They don't think about how one aspect of your financial life will impact the others (think taxes).
With more money comes more responsibility, and wealth advisors’ duties are catered specifically to those who have a significant amount of assets, often labeled as high-net-worth and ultra-high-net-worth individuals. Also known as wealth managers or holistic financial planners - some of the topics wealth advisors cover include risk management, tax, and estate planning.
Wealth advisors often work in teams of experts. Those teams may include portfolio analysts, CPAs, attorneys, and insurance specialists. These professionals typically know all the details surrounding every piece of analysis and implementation of the plan.
Keep in mind, that many firms may categorize their own business under more than one of these labels (they might say they are a "financial advisor" as well as a "wealth advisor". Of course, the best course of action is always to contact any financial professional you are interested in working with directly and learn more about their business model and how they serve their clients.
If you would like to receive these blogs by email, enter your information below.
||About the Author
James M. Comblo, CFF
is a Partner and the Chief Compliance Officer at FSC Wealth Advisors. His greatest passion in the financial services industry is helping clients accomplish their dreams both with investments and their personal lives. To learn more about him click here.
YOU MAY ALSO LIKE: