Financial Advisor Titles Don’t Tell Us Anything … The Service Model Does

I am a Wealth Advisor.

It was not until recently that I realized this statement does not clearly define what I do.

Why? Because there is no consistency in the financial advice business for job titles. For example, the financial services industry uses the title Financial Planner, Financial Advisor, Investment Manager, Asset Manager, and Wealth Advisor interchangeably.

What is consistent, regardless of title, is the two primary service models: Asset Management and Wealth Management.

Asset Management

Asset management consists of caring for your investment assets and provides little to no guidance on retirement, education savings, estate planning, insurance planning and tax planning.

The asset management model starts with a brief conversation focused on the assets you have and where your accounts are held. Next, you may do some high-level goal setting, such as the date you plan to retire. After determining your high-level goal, your advisor will discuss with you the level of risk you are comfortable taking for the rest of your life. Your tolerance for risk is commonly assessed via a series of behavioral questions or a highly impersonal risk tolerance questionnaire.

Once your ‘risk tolerance’ or ‘risk score’ is determined, your advisor will recommend an asset allocation that aligns with your risk profile. Your allocation can be defined as conservative, balanced, growth, or percentage-based, such as 20/80, 60/40, 80/20, with the first number representing the allocation to equities and the second to bonds.

Once your asset allocation is determined, your advisor will choose the investment strategies to deploy within your allocation.

After these steps are complete, your advisor will periodically monitor and rebalance your investment portfolio to stay within the parameters of the allocation determined by your risk profile.

As a bonus, some advisors provide tax-loss harvesting and help with designing tax-efficient strategies for distributing assets before and during retirement.

While asset management is essential, receiving only this service can leave individuals and families with unanswered questions that a financial plan can help solve.

Wealth Management

In contrast, wealth management is a continuous process that integrates financial planning with asset management to create more reliable outcomes for achieving your goals.

Financial planning brings clarity to your goals while making you aware of your financial risks.  The planning process starts by reviewing a variety of information with you. This might include estimated cash flow and spending needs, two years of tax returns, life, disability, property, and liability insurance policies, estate documents, and investment statements.

With this information, a Wealth Advisor will help you define your goals, such as paying down debt, planning for a new home, funding college, philanthropic giving, and planning for retirement.

After defining your goals, your planner will review your financial risk exposures, both in terms of life and disability, but also coverage gaps in property and liability.

Next is to review your investment allocation to determine if it supports your goals or if any changes to your allocation should be considered.

Last, and very important to the plan, is to review your estate plan for up to date beneficiaries and to determine if it is consistent with your legacy goals.

Once your financial plan is finalized, your Wealth Advisor will map out a timeline while coordinating with the other professionals in your life, such as your CPA, Estate Attorney, and Insurance professional to execute the plan.

In addition to the ongoing design and coordination of your financial plan, a Wealth Advisor will manage your investment portfolio. By integrating your financial plan with asset management, you give your Wealth Advisor capabilities to ensure your investment plan supports your financial plan.

However, the relationship and service do not stop after the initial planning and asset management process.  Your life is dynamic, with no shortage of complexity.  Therefore, wealth management is a continuous process, that evolves to meet you where you are today, as life happens around you.

At Austin Asset, we are Wealth Advisors.  We seek to bring clarity and purpose to wealth through authentic and enduring relationships.  For life.