Investing

What Is Wealth Management? An Investor’s Guide

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A wealth manager is the conductor of an affluent investor’s symphony. By combining a diverse mix of complementary wealth management services like portfolio management, estate planning and tax services, they aim to keep every aspect of the wealthy’s financial lives working in perfect harmony.

To qualify to work with a wealth management advisor, you typically need to meet certain net worth and investable assets thresholds. Together, we’ll explore what this high-end service offers and what it takes to access these specialized advisors.

What is wealth management?

Wealth management is a specialized type of financial advisory service that coordinates every aspect of an affluent person’s financial life. As your finances tend to become more complex as you increase your wealth, you may find it helpful to work with an advisor who’s well-versed in those complexities.

That’s where wealth managers come in.

What does a wealth manager do?

Wealth managers provide holistic financial planning that encompasses every aspect of your finances. They often take a goals-based approach to financial management by creating sophisticated plans to meet your various goals, from investment strategy and tax planning to the legalities of estate and legacy planning.

However, not all firms employ the wide range of professionals you might need to carry out the wealth manager’s plan. In those cases, wealth managers typically have a network of specialized professionals they trust to handle your needs with a high degree of expertise.

For example, say you own a business with locations in multiple countries and have family members you want to inherit your business and assets.

In that case, your wealth manager would create an in-depth financial plan to address your present needs and goals. Your manager would then coordinate with specialists like estate attorneys, business succession specialists and tax professionals with expertise in multinational businesses to put your plan in motion.

What is a wealth management firm?

A wealth management firm provides tailored and comprehensive financial management services to high net worth and ultra-wealthy individuals and families. They often coordinate the entire spectrum of financial services, from banking and budgeting to investing, tax guidance and legal advice.

How much money do you need for wealth management?

Thresholds for wealth management vary by firm but typically begin at $1 million in investable assets. Firms may also set higher account minimums for their wealth management programs.

One of the reasons firms set such high limits is due to the higher-risk investment products they offer wealth management clients. For instance, hedge funds, venture capital and private equity are only available to accredited investors. The Securities Act of 1933 defines accredited investors as:

  • Someone earning $200,000 or more for a consecutive two-year period, or
  • Someone with an individual (or joint with a spouse) net worth of $1 million, excluding your primary residence

What is private wealth management?

Private wealth management caters to the ultra-affluent and can require minimum account balances of $5 million or more. While capabilities will vary by firm, you’ll often find products and services such as family office services and philanthropic planning in addition to investment advice and in-house research teams.

Services wealth management companies offer

Wealth management companies offer a range of services to help address your various financial needs, such as:

  • Analysis of cash flow and debt. A clear picture of assets and liabilities can help a wealth management advisor increase your cash flow and reduce the cost of existing debt.
  • Portfolio management. As affluent clients typically have multiple portfolios, it’s essential to coordinate the holdings and tax implications as a whole.
  • Investment management. From daily trades to exclusive private fund offerings, wealth managers coordinate teams that manage and analyze your investments’ daily and long-term performance.
  • Private banking services. Private banking typically offers capabilities not available to retail customers, like preferential interest rates on large loans and higher yields on deposit accounts.
  • Tax services. Minimizing present and future taxes is crucial to protecting and building your wealth and can help maximize what future generations inherit.
  • Insurance analysis. Insurance specialists can ensure you have adequate protection for your assets and loved ones at every life stage.
  • Estate and legacy planning. Estate attorneys can help ensure your assets have the impact you intend — both today and for future generations.
  • Business planning. Many wealthy individuals are also business owners, so capabilities with business finances and succession planning are essential.
  • Family office services. These unique services act as a mini wealth management company for affluent families and combine the breadth and depth of wealth management with philanthropic planning and concierge-like services.

How to research wealth advisors

As wealth management services often vary by firm, it’s important to research several on your path to finding your ideal relationship. You’ll want to consider three key areas: capabilities, qualifications and industry standing.

Capabilities

Before meeting with firms or individual managers, it helps to have an idea of the services you want, the investments you want access to and your total net worth. This information will prevent you from meeting with firms that can’t meet your needs.

For example, if you want access to specialized investments like private funds and secondaries, you can select firms with these capabilities. On the other hand, you might want a firm with in-house estate planning attorneys, which would rule out firms that outsource their clients’ estate planning needs.

Qualifications

As wealth management goes above and beyond everyday investment management and financial planning, an advisor’s certifications can offer additional peace of mind. Some of the more advanced credentials to look for include:

  • Certified Financial Planner™ (CFP) from the CFP Board
  • Certified Private Wealth Advisor ® and Certified Private Wealth Analyst from the Investments and Wealth Institute
  • Chartered Financial Analyst® (CFA) from the CFA Institute
  • Wealth Management Certified Professional® (WMCP) from The American College

While these credentials aren’t required, they can indicate a professional with advanced training in the needs of affluent investors.

Industry standing

Before engaging with a wealth manager or financial advisor, we highly recommend researching the firm and the individual using the Securities and Exchange Commission (SEC) Form ADV or FINRA’s BrokerCheck website.

These sites offer insight into how firms make money, how advisors are compensated and whether the firm or advisor has had any disciplinary measures against them in the past 10 years.

Is wealth management worth it?

A better question is, “What is wealth management worth to you?”

While these financial specialists provide carefully curated services for those who don’t want to spend their days mired in financial chores, these services don’t come cheap.

A wealth manager could make perfect sense if you’re an affluent investor with complex finances who wants a single point of contact for every aspect of your financial life.

On the other hand, if you’re a high net worth individual with most of your assets in your home and employer-sponsored retirement account, you may do just fine with a traditional financial advisor.

What’s next?

The fantastic thing about investing is there’s always something new to learn. So to help you keep the momentum going, we put together a few ideas for the next steps you can take:

Find a Financial Advisor near you

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