Engaging a trusted adviser, such as a financial planner, to guide your fiscal decisions is an excellent first step toward managing your financial future. However, complexity increases as you accumulate wealth and a family. Financial planning alone is often no longer optimal for your financial needs.
There is a significant difference between traditional financial planning and wealth management. Increasingly, clients who may have outgrown their financial planner’s capabilities are coming to us, previously unaware of the opportunities available to them.
A financial planner typically works towards your retirement goals. They are retirement-planning focused and therefore superannuation-focused, offering asset-allocation advice and product recommendations.
Their advice is often focused on problem-solving or on broad public-interest campaigns. For households earning a good income that want to plan for retirement, a financial planner is often sufficient.
However, wealth management offers integrated advice, investment and administration across all aspects of your fiscal life, before and after retirement, and pre- and post-mortem.
The objective is to advise on and manage:
· a range of investment vehicles (such as SMSFs, individual, family trust, and/or companies)
· that together provide optimal long-term
· after-tax outcomes
· that also captures wealth opportunities
· consistent with your risk parameters
· for your family’s wealth.
The investment difference between Financial Planners and Wealth Managers
A significant difference is in the investment management service. Tax is your greatest investment expense. One of the optimal ways to manage tax is to maintain individually managed portfolios of direct securities. Hence the attraction of SMSFs. The opportunity is also available for other investment vehicles.
Investment in managed funds, superannuation funds or similar products just will not provide the ability for tax optimisation.
The Core Distinction: Wealth Manager vs Financial Planner
| WEALTH MANAGER | FINANCIAL PLANNER | |
|---|---|---|
| Advice | Ongoing. Highly tailored, with a team of experts who consider your financial ecosystem. They work alongside your other trusted advisers, such as lawyers and accountant. | • Annual or at a life event. • Usually, a single adviser contact. |
| Focus | Utilises A blend of investment vehicles: One or more of SMSFs, trusts, companies and/or individual portfolios. • Portfolios are considered and managed as a whole, not in isolation. • Focus on maximising returns over many years, acknowledging that this often involves trade-offs. • Tax is typically the largest lifetime expense, so it’s essential to use the right structures and strategies to optimise your wealth for tax outcomes. • Identifying and taking advantage of sensible structuring and investment opportunities as they arise. • Your risk tolerance is central to all advice and investment decisions. What feels comfortable in rising markets may feel very different when markets fall, so this must be understood clearly. • The strategy is designed around your family, which will evolve. That’s why an intergenerational approach to wealth management is important. | • Retirement planning. • Specific financial goals that you set. |
| Investment | • Individually managed portfolios, actively managed. • Designed and managed according to your preferences and values. | • Superannuation-focused, hence superannuation funds. • ‘Model’ portfolios or platform solutions. • Set structure with limited flexibility. |
| Structuring | Considers different portfolio structures for different family members, incorporating estate plans. | Typically, don’t incorporate structuring |
| Tax management | Has all the tools available to optimise tax for your family’s unique circumstances and investments. | Deals with tax at the primary client level, but often not at the secondary (entity or portfolio) level due to an inability to ‘control’ or influence tax outcomes of a broad-based model or product. |
Summary
Setting financial goals and working towards them with the help of a financial planner is a great starting point and sufficient for households with uncomplicated circumstances. A financial adviser will deliver a compliant, functional and structured plan, but doesn’t manage investments dynamically or integrate tax/structure deeply.
However, a wealth manager will understand every aspect of you and your family’s financial life. One with an in-house investment team will actively manage and build bespoke portfolios aligned with your risk tolerance and values. And one with a team of experts that can adjust your strategy based on tax, timing, structures, valuation, and life events.
Conclusion
To effectively grow and safeguard your wealth, many of our clients have recognised the advantages of our wealth management services.
You may benefit from wealth management if you:
● have $1m ($500,000 if you are still working) or more of investable wealth
● wish a team of experts together managing all aspects of your wealth
● require a high level of personal service from the people managing your wealth
● value a long-term partnership over transactional advice