In the financial services industry, there are many terms used to describe the professionals who help you with your investments. Over the course of my career, I’ve heard them all used interchangeably and what I’ve realized is that most investors don’t know the differences that exist among the various titles and certifications. The two that I see used the most – and which I would argue are the most misunderstood – are that of Financial Planner and Wealth Manager.
What a Financial Planner Does, and Doesn’t, Do for You
In general, a Financial Planner will prepare a plan for you, putting together projections, analyzing how much you have today and what your expected growth may be at the time of retirement. He or she will take into account inflation, and may help you determine how and when to take your distributions in retirement in order to forecast how long your money will last you under a certain scenario.
Because many are focused on incorporating specific investment vehicles into your retirement plan, they tend to build your plan around the vehicles they have to offer at that point in time. Financial planners working for large firms may have a pre-determined pool of investments to offer. This limits the client’s ability to consider things outside the scope of these offerings. Independent Financial Planners can offer clients a broader scope of traditional and alternative investments for which their broker/dealer has performed due diligence and approved for incorporation into a financial plan.
Yet there is a limit to the involvement that a Financial Planner will have on his or her client’s portfolios. Once the plan is prepared, with a mix of investments incorporated, management, oversight and implementation of the plan typically falls under the responsibility of the client. If the client has annual meetings with the Financial Planner, that means the planner may be looking at the portfolio once a year in preparation for that meeting. Many, however, don’t have regular review meetings, leaving it to the client to reach out if there is a concern or need.
Finally, because of the Financial Planner’s focus on product (i.e. specific investments), they may not be taking into consideration the client’s entire financial picture, including taxes, employer-sponsored 401(k) or pensions, or other assets and liabilities that may exist. They don’t have to. Their level of legal responsibility doesn’t require it, but rather, it requires them only to make investment recommendations that are appropriate at that point in time.
Wealth Managers: A Holistic Approach
In contrast, a Wealth Manager’s job stretches far beyond what a traditional Financial Planner does for clients.
- The plan. First, we focus on the creation of a comprehensive plan, with no pre-conceived notions of what investment vehicles should or shouldn’t be included. After all, until we know the entire picture, we don’t know where or how investments should be made to reach all of the client’s goals. We’ll explore goals, what retirement looks like, estate and insurance planning, the client’s legacy intentions, and more. We’ll also work to determine what risks may arise that could impact the plan, and the best ways to mitigate that risk.
- Execution and Management. Whereas the client bears this responsibility under a Financial Planner, we as Wealth Managers hold a fiduciary responsibility to monitor the portfolios and do what’s right for the client at all times. Our recommendations must always fit the client’s needs and goals, not just at the time the plan was created. Here at Krilogy, we employ a sophisticated technology platform that enables us to monitor all portfolios on a daily basis, making ongoing adjustments to keep the client’s plan on track and perform analysis to forecast what may happen to the client’s assets under certain conditions like interest rate hikes or global economic challenges, allowing us to anticipate those impacts and mitigate the risk.
- Review. Ongoing reviews with each client provide an opportunity to cover, in detail, the status of all current accounts (those held with Krilogy as well as outside accounts such as 401(k) plans), investment performance, investment risk, estate plans, as well as changes in life or goals, cash flow needs, and tax issues. This helps us work together with the client to get a sense of what needs to be adjusted on a regular basis.
- Home Base. A Wealth Manager serves as home base for the client’s financial life. Because we’re not a transactional business, we build a deeper relationship with clients which provides safety and confidence. Clients know they can call us not only for advice, but to administer their finances, keep them on the right track, and take care of them. We’re a partner for life, working with you and on your behalf to help you reach your goals.
Do I Need a Wealth Manager?
There’s a misconception out there that wealth managers are only for the super-rich. While there are many firms out there who focus only on ultra-high net worth clients, we at Krilogy bring sophisticated wealth management to a much broader audience. We leverage our technology, in-depth market analysis approach, and the knowledge and talent of the entire firm to create and manage client portfolios. A wealth manager can bring a great deal of value to clients, especially for clients who have assets across many accounts, complicated financial situations, and scenarios where many family members are involved in trust or estate matters. Clients with straightforward investments where things aren’t so complex may be well suited to manage their portfolios on their own. If in doubt, reach out to discuss your needs. Your situation may be more complex, or more simple, than you think.
