Choosing a private wealth manager versus a financial advisor (2024)

In an era of do-it-yourself personal finance and investing, not everyone has the time— or inclination — to go the DIY route. If you decide to turn the financial reins over to a pro, you may have to distinguish between choosing a wealth manager versus a financial advisor. While the differences are pretty straightforward, establishing the criteria to differentiate between the two can be daunting to the uninitiated.

Ultimately, the firms you approach will direct you to the proper divisions within their organizations — to either a wealth manager or financial advisor — based on your financial situation, how much cash you have and what you need or want to do with it.

So, it’s best to have your situation and goals clearly outlined, along with an understanding of who’s who among money managers, before making the call.

What is a private wealth manager?

A private wealth manager works with high-net-worth individuals, generally defined as those with at least a million dollars in investable assets. While they often provide investment advice, they tend to also focus on broader areas of wealth management, including tax efficiency, estate planning and charitable giving for people with large sums of money.

While wealth managers sometimes work for private companies, they often reside in the wealth management departments of large retail and investment banks. Typically, clients who have existing relationships — and large sums of money on deposit — with a firm have access to wealth management divisions.

At the highest levels of wealth management, wealth managers provide specialized services, such as cybersecurity, aircraft management and art and collectibles planning to ultra-high-net-worth individuals, whose liquid assets exceed $30 million.

What is a financial advisor?

A financial advisor generally works with a wider assortment of clients. While some deal with broad wealth management areas, they often focus on specific investment-related advice and strategies. Firms usually have minimums required to work with a financial advisor. However, they’re less stringent than wealth management minimums.

The relationship you have with your financial advisor can be as simple as an annual portfolio review or occasional conversations around buying and selling stocks and other investments. It can go deeper, dealing with ongoing concerns such as taxes, insurance and retirement.

Key differences between a private wealth manager and a financial advisor

As we have established, the main difference between a private wealth manager and a financial advisor comes down to the type of clientele they work with. If you have a high net worth, you’re more likely to go with a wealth manager. Otherwise, you’ll probably employ a financial advisor.

Fortunately, deciding which type of financial professional to choose isn’t the hard part. Your assets and the structure of the industry essentially make this decision for you. If you approach a bank or other financial company and explain your situation, they’ll let you know the services — and level of service — you qualify for.

Things get more complicated around professional designations and regulations.

As the Financial Industry Regulatory Authority (FINRA) explains: “The SEC regulates investment advisers who manage $110 million or more in client assets, while state securities regulators have jurisdiction over advisers who manage up to $100 million. Advisers with less than $100 million in assets under management (AUM) must register with the state regulator for the state where the adviser has its principal place of business.

“When a state-registered adviser’s AUM reach the $100 million threshold, the adviser might opt to register with the SEC — but when the adviser’s AUM exceed $110 million, they generally must register with the SEC. It’s important to find out exactly which services a professional who wears multiple hats will provide for you and what they’ll charge for their services.”

To this end, a wealth manager at a big bank might fall under the legal and/or regulatory scrutiny of multiple organizations, including FINRA, the Securities and Exchange Commission, the Federal Deposit Insurance Corp. and an assortment of other federal and state agencies.

To take the confusion out of this bureaucratic mélange, consult FINRA’s BrokerCheck and the SEC’s Investment Adviser Search to check the background and qualifications of the person or firm you think you might trust with managing your money.

Private wealth manager and financial advisor fees

Private wealth managers and financial advisors get paid a flat fee or a percent of the assets they manage.

Generally, you pay lower percentage-based fees and require smaller minimum balances with a financial advisor than with a wealth manager. The percentage you pay decreases as assets under management, or AUM, increase.

Flat fees increase as your AUM increases.

While fees and minimums vary by firm and wealth manager or advisor, our survey of the landscape generated the following typical structures, moving from broad to specific.

According to a 2021 AdvisoryHQ study, the typical AUM fee is just over 1%. For example, if you keep $100,000 with a financial advisor, expect to pay closer to 1.12%, whereas a balance of $1 million might carry a 1.02% fee. As you get above $1 million AUM, expect to see fees drop to less than 1%.

Flat fees generally range between $7,500 annually (for up to $500,000 AUM) to $55,000 (for more than $7.5 million AUM).

Minimums range from zero to a few hundred dollars (mainly with robo-advisors) and can climb to as high as seven figures with wealth managers.

Individual firms tend not to loudly broadcast their fee structures, so you have to do some digging, which we did.

A sampling of the specifics shows that Morgan Stanley gives its financial advisors the general leeway to charge between $250 and $5,000 per client. However, advisors with advanced credentials or designated wealth managers can bill clients up to $10,000 on assets of more than $5 million.

At Merrill Lynch, fees to work with a financial advisor or wealth manager top out at 1.75% of AUM, while the firm’s lower level “financial solutions” division charges no more than 1.10%.

At Fidelity, you’ll need at least $10 million in investable assets (with $2 million committed to a Fidelity program). Fees range between 0.20% and 1.04%.

Here again, when you solicit a firm and detail your financial picture, they’ll funnel you to the appropriate financial advisory or wealth management program. They might even suggest you take advantage of the latest, not-quite-DIY technology.

From basic financial advisory services to larger scale wealth management, you can opt for a robo-advisor. Robo-advisor fees tend to be lower than what financial advisors and wealth managers charge. However, with a robo-advisor, you’re usually dealing with an algorithm rather than a live person.Robo-advisors aren’t limited to financial advisors. According to a report from Deloitte, robo-advisory is becoming more common in the field of wealth management. High-net-worth individuals might opt for a robo-advisor because the technology can help them make — or even automate — sound decisions quickly for fees lower than what traditional banks and brokers charge.

Do you need a financial advisor or a wealth manager?

As explained, the decision often gets made for you on the basis of your financial situation.

A good rule of thumb is to start with a financial advisor, then consider upgrading to a wealth manager for their broader knowledge base and more specialized services. According to Northwestern Mutual, once you have amassed at least $250,000 worth of investable assets, you might consider a wealth manager.

Because you’ll likely pay higher fees to a wealth manager, ensure you require the broader scope of services they provide. If you’re just looking to put together and maintain a retirement portfolio, a financial advisor might be all you need.

Choosing a financial professional for your needs

Some people sitting on seven figures’ worth of wealth are more than comfortable managing their own money. Others with much less sleep better at night knowing that an expert has their back. Sometimes your needs have less to do with how much money you have and more with how you feel about making decisions around seemingly endless investment choices and subsequent near- and long-term planning.

Once you decide who you are with money, you can move forward with finding the right financial advisor or wealth manager to assist you on your journey.

As discussed, your situation might dictate the classification of financial pro you work with. However, no matter the level you’re at, it’s important to consider not only the distinctions between a wealth manager and a financial advisor but also the universal points we discuss in this guide on selecting the financial professional best equipped to get you where you want to go.