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Wealth management is a top-tier financial management service that caters to wealthy individuals by curating and coordinating the right mix of financial products, experts and strategies to help grow and protect their wealth. It’s a consultative process that focuses on a client’s entire financial picture, not just one part of it.
Someone who is a wealth manager coordinates a team of experts to help their client reach their financial goals. Find out more about what their services entail to help you determine whether wealth management may be right for you.
How much would you like to invest?
For high net worth individuals (as defined by the SEC as having over $1.5 million, or at least $750,000 under management), managing their assets can be a full-time job. This is where wealth management enters the picture.
Wealth management offers a comprehensive package of financial services that can touch on every part of the client’s financial life, from investment advice to tax and estate planning. To do this, wealth managers will tap professionals and experts, such as accountants or lawyers, to help execute their client’s overall financial plan and strategy, which will be customized to their unique situation.
Wealth management services can include:
When it comes to various types of financial planning services, wealth management is the cream of the crop. Wealth managers generally focus on helping high net worth individuals manage all of the intricacies that come along with high levels of wealth, like tax complexities and estate planning challenges. If you need assistance in these areas, a wealth manager could be helpful.
Wealth managers are usually not needed for the typical consumer, and are instead often enlisted by high net worth and ultrahigh net worth individuals. Many wealth managers require investment minimums that can climb into the millions. In fact, the certified private wealth advisor (CPWA) certification, designed for wealth managers, specifies that it is designed to address the needs of clients with a minimum net worth of $5 million.
Additionally, the fees that wealth managers can charge — typically a percentage of a client’s assets under management — can be a deal breaker for the typical consumer.
Whether or not wealth management is going to be beneficial to you largely depends on your financial situation. That being said, wealth management offers the following key benefits:
It can be easy to get wealth management confused with other types of management services, such as asset management. The main difference between wealth management and asset management (or portfolio management) is that while wealth management takes a comprehensive approach to a client’s finances, asset management takes a more granular approach by focusing specifically on a client’s investments.
The typical role of an asset manager is to focus on the performance of your portfolio and your asset allocation, and can include the following services:
Additionally, wealth management tends to be more exclusive than asset management. Fidelity, for example, offers an investment management service in which you work with a team of advisors. This requires a minimum investment of $50,000 and an advisory fee of 1.05%. However, it also provides a dedicated advisor for investment management through its Wealth Advisor offering, which requires a significantly higher minimum investment of $250,000 and an advisory fee ranging up to 1.50%.
Financial planners and wealth managers both fall under the umbrella term of financial advisors, but the two vary in significant ways.
Financial planners focus primarily on helping clients identify and reach their financial goals by designing a financial plan for them to follow. Their services, which are generally focused on lifestyle planning, can include creating a budget, planning for taxes or retirement and setting other savings goals. Meanwhile, wealth managers are more of a one-stop shop, with a focus on growing and protecting wealth.
Additionally, while a wealth manager’s clientele consists of high net worth individuals, a financial planner can serve a broader range of clients, from those who are just starting out to older investors preparing for retirement.
If you’re in the market for a wealth manager, carefully review your options, the services you’re in need of, the costs associated with each firm and the minimum investment requirements.
While wealth managers are not required to have a specific certification, they will likely have financial certifications like a certified private wealth advisor (CPWA), a chartered financial analyst (CFA), certified financial planner (CFP) or chartered financial consultant (ChFC). Wealth advisors will also need a license to buy and trade stocks for clients or to give investment advice.
When it comes to approaching a client’s wealth, a wealth manager will likely employ a number of investing strategies, many of which go back to tried-and-true methods of financial success, as well as focus on the client’s risk tolerance and financial goals. Specific investing strategies that they might deploy could include:
At its core, however, a wealth manager generally will use the best strategy depending on their client’s individual needs.
Wealth management does not come cheap. To even gain access to a wealth manager, you will typically need anywhere between $250,000 to over $2 million. From there, fees can range widely from firm to firm but typically hover around 1% of assets under management — Fidelity, for example, charges between 0.50% to 1.50% of your investments.
Wealth managers will typically charge clients based on a percentage of their assets under management. They might also charge a flat or hourly fee for wealth management services that are provided on a one-time basis or as needed. Wealth management firms might also make additional money through commissions earned by selling clients certain financial products.
All information included in this post is accurate as of July 7, 2020. For more information, please consult the Investment Firm’s website.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.
Sarah BergerSarah Berger is a former writer at LendingTree, where she covered personal finance, specifically focusing on challenges and opportunities facing millennials. Before joining LendingTree, she was a writer for CNBC and Bankrate.
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