There are so many different terms used to describe a relationship with a financial professional that what you get may frequently differ from what you expected. Terms like investment consultant, financial planner, wealth management or broker are frequently tossed around with little thought as to what each actually means. Regulation surrounding the titles and services offered by each may be unclear, and as a result confusion is common.
I’ll begin this discussion with the term that in my experience provides the least amount of service: broker. As the name implies, a broker is typically someone licensed to sell you something, period. Some brokers make their sales in a consultative style and others simply sell stuff. You may not hear from them again until you want to buy something else. Many financial brokers come in the form of an investment broker or an insurance broker.
Investment consultant would be next up the ladder in my mind. The name is fairly self-explanatory, and the service is intended to be an investment focused service. Similar to brokers, an investment consultant may consider other material factors but generally doesn’t tend to be as broad and detailed as the next two levels.
With the remaining two terms, financial planner and wealth manager, there is widespread disagreement amongst the public and financial professionals alike as to the distinction.
From my perspective, the difference between financial planning and wealth management are difficult to discern. It may be that we are splitting hairs in an attempt to distinguish the two, and that distinction is best left to the eyes of the client according to how they’d like to receive service.
According to the Financial Planning Association, the definition of financial planning is: “The long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Remember, financial planning is a process, not a product.”1
A financial plan can be prepared just like a final exam. It can be comprehensive, accurate and valuable. But it can be delivered as a snapshot of your financial house is it exists right now with some assumptions about future issues.
Wealth management to me connotes motion and the ongoing nature of a comprehensive financial planning relationship. One where the advisor agrees to proactively stay on top of client issues today and as they change and unfold into the future.
Whatever you call it, be sure that you are getting what you need and what you may be paying for. Your biggest challenge may be recognizing what you need, and starting with a comprehensive plan addressing everything may be a good choice to see what cracks may exist in the walls of your financial house.
1 Source: Financial Planning Association
John P. Napolitano CFP®, CPA is Founder and Chairman of Napier Financial in Braintree, MA. Visit or napierfinancial.com for more information. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and Napier Financial are separate entities from LPL Financial.
