When it comes to financial advisory services, there are a lot of options out there—each with its own unique structure and approach. From a distance, several of these separate services might seem quite similar, but that’s not the case at all. Two that get confused often are wealth management and investment management.
Given the complexity of the financial marketplace and the wide range of products it offers, it’s important to understand the difference between these two services.
What Is Wealth Management?
Wealth management is a comprehensive, all-encompassing process that covers many strategies for building wealth. It uses a collaborative approach to help clients make and meet their defined financial goals throughout their lives.
A wealth management plan covers several separate strategies for striving toward prosperity and maintaining financial health. It takes more of a “big picture” view of a client’s overall economic well-being, breaking it down into separate components.
A certified wealth management professional may cover several or all of these functions:
- Risk management
- Retirement planning
- Tax planning
- Estate planning and management
- Cash flow analysis
- Debt management
- Real estate management
- Charitable giving
- Investment planning
Since wealth management takes on many functions, it’s typically associated with high-net-worth individuals with multiple income and expense streams.
What Is Investment Management?
An investment manager, by contrast, focuses exclusively on the assets in their clients’ investment portfolio. These may include:
- Stocks
- Bonds
- Mutual funds
- ETFs
- CDs
- Real estate investment trusts
- Precious metals
Any asset owned for the specific purpose of growing wealth through investing can apply here.
Investment managers take many approaches similar to those of wealth managers, but they do so strictly to advance their clients’ investment goals. They assess risk, establish timelines, develop strategies, diversify holdings, and adjust asset allotments to spur growth over time.
In other words, investment management takes a narrow focus on investment commodities, whereas wealth management considers the entire financial profile of the client. Wealth management may include investment management as one of its functions. However, investment management cannot include general wealth management as a responsibility. Although some might offer financial advice, investment managers are focused on your investments, not your full financial picture. For example, if you ask, “Can I afford to buy this new car?” or “How much can I put down on this new house?” their ad hoc answer doesn’t consider how that purchase fits into your whole financial plan. You need proactive financial advice, not reactive; advice that takes into account your retirement plans, retirement savings, emergency fund—the big financial picture.
Issues With Investment-Only Management
Many investors—particularly those who might fall outside of the high-net-worth category—employ the services of investment advisors to help manage their portfolios. There are plenty of solid, reputable investment advisors in the marketplace; that said, it’s important to understand what they can and cannot do.
The main drawback of investment management is its focus on one part of the overall financial picture. It lacks the context a wealth manager can see from a high level. An investment manager has one purpose only.
That can be a problem when other aspects of a client’s finances affect their investment decisions. Without knowing the bigger picture, it’s hard for an investment manager to determine how much to save or spend.
Investors having cash flow problems might have little clarity on where they can get money.
When investments aren’t integrated with the bigger financial picture, clients might be forced to make emergency withdrawals for investment funding. This may impel cash disbursements at inopportune market times (or even incur withdrawal penalties).
CFP® Accreditation
Qualifications and educational background significantly contribute to the competence of your advisor. Unfortunately, there’s a common misconception that all individuals using the title “financial advisor” possess the same level of expertise and education.
While the United States boasts around 300,000 financial advisors, only one-third of them hold the esteemed CFP® designation. It’s essential to recognize that just about anyone can offer financial planning services. In fact, obtaining the title of financial advisor isn’t that difficult—simply pass a securities exam and secure employment with a sizable brokerage firm.
According to the CFP Board, unless your financial plan is put together by a CERTIFIED FINANCIAL PLANNER™ professional, there’s no guarantee when it comes to its quality and accuracy.
Following are several reasons why the CFP® certification is widely regarded as the industry’s gold standard for financial planners:
- The criteria set by the CFP Board far exceed just passing a securities exam. It encompasses a more comprehensive education, elevated standards, substantial experience, and ongoing ethical obligations.
- CFP® professionals are educated to adopt a holistic approach to managing wealth.
- These professionals provide guidance on a wide spectrum of financial matters, including investments, retirement planning, insurance planning, tax planning, charitable giving strategies, and more.
- CFP® professionals undergo training to assist in planning every facet of a client’s financial life, whereas a typical financial advisor likely possesses much less skill.
In addition, a college degree is required by the CFP Board for CFP® professionals, adding another layer of qualification to their expertise.
The Deerfield Difference
Professionals at Deerfield Financial Advisors, are held to high standards and abide by the NAPFA Fiduciary Oath, which mandates they always act in good faith and with candor, be proactive in disclosing any conflicts of interest that may impact a client, and not accept any referral fees or compensation contingent upon the purchase or sale of a financial product.
Our advisors include CERTIFIED FINANCIAL PLANNER™ professionals and some who are in the process of obtaining their certification. We strongly believe in personalized strategies like WealthwhileSM that are grounded in purpose and our clients’ goals.
To learn more about how we aim to help you transform your wealth into your worthwhile, call (317) 469-2455, email ssteel@t8j.01f.mywebsitetransfer.com, or get in touch through our contact form.
About Susie
Susie Steel is COO, Wealth Manager, and Senior Shareholder at Deerfield Financial Advisors, a fee-only financial services and wealth management firm with offices in Indianapolis and Chicago. With over three decades of experience in financial planning, Susie’s approach has always been rooted in a spirit of service, treating each client as an extension of her own family.
She simplifies the complex for clients, with the goal of creating a calm, trusting, and nurturing environment. Her unwavering commitment to the principle of “To whom much is given, much will be required” serves as the driving force behind her dedication, diligence, and empathy.
Susie obtained a business management degree from Ball State University, holds the CERTIFIED FINANCIAL PLANNER™ designation, and held the Accredited Estate Planner (AEP®) designation from the National Association of Estate Planners & Councils (NAEPC) from 2013 to 2018. Susie is actively involved with an extensive list of professional organizations, including NAPFA (The National Association of Personal Financial Advisors), a premier association of fee-only financial advisors, and has served on multiple boards, committees, and councils. Her consistent recognition as one of Indianapolis Monthly’s “Five Star Wealth Managers” for the past decade attests to her outstanding accomplishments (2009-2023).
Outside the professional realm, Susie gives back to her community through her involvement in the Financial Center First Credit Union (FCFCU) to the Indianapolis Children’s Museum Planned Giving Council and Kiwanis Club of Northwest Indianapolis to Junior Achievement. She mentors women through the CFP® Board’s “WIN-to-WIN” program, embodies the spirit of Rotary Club of Carmel, advocates for Indiana Canine Assistant Network (ICAN), and actively serves on the board of the Mary Rigg Neighborhood Center (MRNC).
Susie and her husband, Kevin, reside in Carmel, Indiana, where they raised their three children. Outside the office, her focus centers around family, spirituality, and fostering meaningful connections. Embracing the concept of the body as a temple, her personal growth is nurtured through practices like strength training, yoga, and meditation. In her leisure time, she enjoys strolls with her dog, Lulu, and indulges in movies, podcasts, books, and the theater. To learn more about Susie, connect with her on LinkedIn.
