The difference between wealth management and financial planning

Both wealth management and financial planning are financial strategies to apply in your own finances. Wealth management and financial planning are often interchangeable, but there are some differences between them.

Understanding the differences between wealth management and financial planning will help you make better-informative financial decisions.

What is financial planning and wealth management?

What is financial planning?

Financial planning covers all aspects of your financial orientations, from budgeting to retirement savings to estate planning. 

In other words, financial planning helps you make the most of your money, whether it’s for short-term goals or long-term plans. It’s related to all financial aspects so that they align with your goals and achieve your desired outcome.

For example, if you want to retire at age 50 but now are getting into debt of $50,000 and no savings available, then you will need to find ways to reach your desired outcome by your planned date. 

The goal of financial planning is to make sure that you have enough money at a given time of your funds but also to ensure that there are no occurrences or surprises along the way.

The difference between wealth management and financial planning

What is wealth management?

Wealth management, on the other hand, mentions a service that offers high-net-worth families and individuals with their financial demands. 

Wealth management is to help manage their liability exposure, grow their wealth and devise strategies to pass their wealth on to their heirs. 

In other words, wealth management has a comprehensive approach to the financial situation of higher-net-worth clients, including tax planning and investment management.

Wealth management can be a great suggestion if you frequently invest, earn a salary in a higher tax bracket, have different streams of income…

The difference between wealth management and financial planning

Basically, 2 terms have different purposes. Wealth management deals with preserving and growing your wealth, while financial planning helps you plan your spend. 

Financial planning often focuses on the middle class or lower-middle-class, who need financial advice to help them make ends meet while wealth management service is often selected by the highly elite or high net worth class. Those high net worth individuals want to focus on seizing their business opportunities that help to double or triple their existing wealth.

Financial planning is often a passive process which only happens once or twice a year. Wealth management is an active process that consists of monitoring and management of your finances for the long term. 

Financial planning is related to daily aspects of planning your cash, while wealth management is to preserve and increase your wealth. The assets such as land, business corporate offices, property, furniture... are taken into consideration.

To know more the differences between financial planning and wealth management, it’s better to discuss some of the main phases where financial planning and wealth management activities happen:

Learning phase

It gets started with financial management. You learn about investment strategies, businesses in favor of consumers, allocating your cash and budgets.

First, you need to familiarize yourself with how the financial system works. No wealth management is really necessary.

With a good follow-up of financial planning, you increase your assets or create a sizable amount of wealth. At this stage, a wealth management strategy can come into being.

Accumulation phase

Now, you can start applying your investment strategies. Again, you follow up with your financial planning strategy. You may apply no wealth management at the first stage. 

You are at the threshold of accumulating your wealth. You can make use of wise wealth management methods to preserve your wealth or add more.

Retirement phase

Financial planning now becomes the need of the hour because you need to make sound decisions on where you want to invest money to increase your wealth more.

Now you inherit wealth, you need to apply a wise wealth management system. 

What to look for in a financial planner or a wealth manager?

When choosing a financial advisor or wealth manager, it’s vital to take some considerations. 

Not all financial advisors or wealth managers have the experience and knowledge you expect. When choosing a financial advisor or wealth manager, you can follow some information:

Credentials and experience

A financial advisor or a wealth manager should have a degree/qualification in finance or a related expertise.

Experience is another important factor when picking a financial advisor or wealth manager. Ideally, it’s better to work with a financial advisor or wealth manager with a minimum 5 years of experience.

Fees

You should know about fees before working with a financial advisor or a wealth manager.

Some wealth managers will charge an annual fee, while others charge a percent of your assets in terms of management. Typically, financial advisors charge a flat fee or an hourly rate.

Reputation

It’s better for you to work with a professional you can put your trust in. For example, you can hire a financial professional for your military family, starting from other military families.

If you don’t know anyone, go through online reviews and check what others are commenting on them.

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