Financial planning and wealth management solutions often have a lot in common. If you're looking for professional support, it's important to understand how they're similar and different. Take a look at what's going on at the nexus of financial planning and wealth management so you can find the right services.
Established vs. Developed Wealth
Broadly speaking, the main distinction between the two fields is whether the client has significant established wealth or not. Every firm has different standards, but financial planning solutions are for folks with less than one or two million dollars under management. In other words, financial planning is for the majority of people.
Notably, an investment advisor may encourage someone on the wealth side of the ledger to take a more passive approach. They generally have resources that allow them to compound growth at lower rates while still growing their wealth. Conversely, someone looking for retirement planning solutions may need to be more aggressive if they want to maintain a particular standard of living down the road.
You'll find considerable overlap between the two fields in terms of topics. If you're dealing with retirement and estate planning issues, for example, you could go either way between a wealth manager or a financial planner.
Taxes often draw the line between these two approaches. If you have several million dollars under management, you're probably looking at wealth management solutions that take the sting out of taxation. While that's still an issue when it comes to financial planning solutions, it's different. Typical clients can delay dipping into their retirement planning accounts in ways that allow them to realize smaller capital gains taxes. Conversely, people of wealth will have a harder time because they're more likely to have income-generating investments in late life.
Most wealth management clients have enough assets and money to address basic needs. They can, for example, afford to fund college savings accounts for their children immediately. They may elect to start a bit low in anticipation that growth will fill in the gaps, but this is more about letting the power of investment work. A financial planning client, on the other hand, may have to grow the account over more than a decade to ensure its success.
A simpler way to think of the difference involves stability. People in need of wealth management help need to maintain their circumstances while seeking opportunities strategically. If you require financial planning solutions, you're likely looking to take on more risk for bigger returns over decades. Notably, many people transition from financial planning to wealth management as their circumstances improve.
For more information, contact a local company, like TFG Wealth Management.