Wealth management is the allocation of a person’s wealth. It is consultative in nature and does not refer to one specific facet of financial management. Rather, the overarching focus of wealth management is on the entire financial wellbeing of an individual, family, or trust. This holistic approach is meant to manage wealth with an eye towards the overall greatest benefit over an extended period of time.
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What Does a Wealth Manager Do?
Wealth managers typically have a plethora of different skills and services that they can offer. This allows them to create tailor-made wealth management strategies for each client depending on the client’s own specific needs. Some of the different financial services include:
- Estate planning.
- Tax strategies.
- Risk management.
- Financial planning.
- Retirement planning.
- Investment advice.
- Banking services.
Often a wealth manager will specialize in one or more of these areas as well, giving them a niche service that they can provide to their clients.
A wealth manager who specializes in retirement planning, for instance, will still be able to provide a holistic approach to a client’s financial needs. However, while doing so, they will also be able to give them ultra-personalized advice regarding their retirement savings and investments.
Types of Wealth Management
In addition to the slew of services and specializations that a wealth manager can offer, there are two overarching approaches to wealth management when looked at on a macro scale.
- The first is a collaborative approach. This involves a wealth management professional or firm working with other outside advisors, such as a family accountant, lawyer, or insurance agent. In this case, the wealth manager operates as a central figure, communicating and orchestrating events and decisions among the various parties involved.
- The second wealth management option is the single office (or family office) approach. While it still involves a collaborative effort from a group of professionals, the single office approach to wealth management takes place when an individual receives all of their wealth management services from one firm. This comprehensive service is typically offered by bigger organizations such as a large bank or brokerage firm. It provides all of the needed services (tax, insurance, legal, etc.) along with wealth management consulting all under the umbrella of one company.
Who Uses Wealth Managers?
Wealth management services are most often available to those who have either a high or ultra-high net worth. The Securities and Exchange Commission (SEC) typically refers to these individuals as “accredited investors” and defines their wealth as “a net worth greater than $1 million.” In other words, affluent individuals need wealth management the most because they have significant wealth to manage.
Nevertheless, while accredited investors are clearly high-priority clients due to the quantity of wealth they possess, wealth management services are technically available to more than just those with larger fortunes. In addition to anyone with a greater net worth, at times wealth managers may serve families, foundations, and anyone with moderate levels of wealth.
Wealth Manager vs. Financial Advisor vs. Investment Advisor
Wealth management is often confused with other financial services, especially those provided by financial advisors and investment advisors. While related, each of these financial professionals serves a specific role:
- Financial advisors — also known as financial planners — help with things like setting budgets and managing bank accounts.
- Investment advisors — also known as stockbrokers — provide professional services regarding financial investments.
While both of these terms can overlap in responsibilities at times, both are included under the wider scope of a wealth manager’s duties. A wealth manager considers investments, budgets, and bank accounts, all with a big-picture mindset towards what is the best decision for an individual’s finances as a whole.
How Much Do Wealth Managers Cost?
As with many financial professionals, the costs associated with hiring a wealth manager can vary widely. Some commonwealth management pricing strategies include:
- Charging a set percentage of an investor’s assets annually.
- Charging an hourly fee.
- Charging a fixed annual fee.
At times a combination of these strategies may be utilized as well. It’s in the best interest of anyone considering hiring a wealth manager to discuss their particular fees or rates before deciding whether or not to hire them.
Tips for Choosing a Wealth Manager
As is the case with most financial decisions, you should choose a wealth manager thoughtfully, with your unique situation in mind. Some factors to consider include:
- Does the wealth manager have a minimum asset requirement? If you don’t have enough wealth to meet this requirement, you cannot hire them even if you wanted to.
- What costs are associated with using a specific wealth manager? Do they charge a fee, percentage of assets, or a combination of both?
- Does a wealth manager specialize in a particular area? This can make them more or less valuable depending on your own needs.
- Is the wealth manager a fiduciary? You want someone you can trust to put your own needs above their own success.
Once you’ve answered these questions, you’ll be able to hire a wealth manager that will best fit your own personal needs.
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