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What is wealth management?
Wealth management is the most advanced form of financial advisory services. A wealth advisor typically works with high-net-worth individuals to create a tailored investment strategy to help them manage their assets. Wealth management also generally includes comprehensive financial advice, tax guidance, estate planning and even legal assistance.
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What does a wealth manager do?
Wealth managers generally provide financial services to the highly affluent and may have expertise in the types of financial questions that affect the ultrawealthy, such as how to reduce the estate tax. Many private wealth managers will coordinate with other financial experts — such as accountants or estate planning specialists — on behalf of clients to offer holistic financial advice.
For instance, a wealthy individual who has been married and divorced, owns multiple properties and has numerous investments and accounts may need expertise in legal matters, property taxes and investments. A wealth manager could create a complex financial plan that takes each of those needs into consideration, either on their own or with outside counsel.
How do wealth managers get paid?
This may depend on where the wealth manager works. At a large firm, wealth managers may receive a salary and bonuses. If you are working with a private firm owned by an advisor, any advisory fees (generally 0.25% to 1% of assets under management) would go to the advisor. You should always ask a potential advisor what their fee structure is. Learn more about the different kinds of financial advisor fees.
How much money do you need for wealth management?
Wealth management services often require steep account minimums. For example, Fidelity’s “private wealth management service,” where you have an entire team of financial professionals working on your behalf, requires at least $2 million invested through Fidelity Wealth Services and $10 million or more in total investable assets. Fidelity also offers a simpler “wealth management” service, where you work with an individual advisor, which requires a $250,000 account minimum.
Vanguard, another online brokerage, offers a "personal advisor wealth management service," that gives clients access to a group of financial specialists as well as a dedicated CFP. The minimum to qualify for the service is $5 million. Vanguard also provides lower-tiered wealth management services for a minimum of $500,000.
» View our list of the best wealth advisors
Wealth management strategies
There are many different investment strategies financial advisors use to help increase their clients’ wealth, from value investing (Warren Buffett’s favorite) to growth investing. Wealth managers tend to have slightly different approaches since they are working with such large accounts. They may give their clients access to a wider range of investments than regular financial advisors, like hedge funds and private equity offerings. Wealth managers also tend to use strategies that are more holistic, meaning that any financial plan a wealth manager puts together should incorporate all aspects of a wealthy individual’s life, including things like estate and tax planning, not just their investments.
The strategy a wealth manager employs should also match the individual investor’s risk tolerance and financial goals. For example, if a client is nearing retirement, a wealth manager might start shifting the focus from risky growth investments to safer investments that can help a retiree maintain their wealth.
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Wealth manager credentials
When looking for a wealth manager, it’s important to figure out how they are paid and what credentials or designations they have. It’s a good rule of thumb to work with a fee-only fiduciary, which means that they are paid directly by you for their services and they can’t receive compensation for recommending certain products. Having a fiduciary duty means that they are legally obligated to put your needs first.
While many wealth managers will be registered investment advisors, consider working with a certified financial planner. CFPs possess the most rigorous certification for financial planning and are held to a fiduciary standard. In addition to a CFP, you may want to work with a certified public accountant. A CPA will be able to help you with your tax needs. Some wealth advisory firms have both CFPs and CPAs on staff who can work together to help you manage your full financial picture.
What is the difference between a wealth manager and a financial advisor?
“Financial advisor” is a general term for various financial professionals and has no regulation or certification requirement. A wealth manager typically refers to a specific kind of financial advisor whose work focuses on topics that concern very wealthy individuals. A wealth manager usually has a significantly higher investment minimum than a regular financial advisor.
Wealth managers also tend to offer more services than financial advisors. These services can include estate planning, trust services, family legacy planning, charitable giving planning and legal planning. Some wealth managers have even incorporated concierge health care into their services.
Keep in mind that the job title “wealth manager” is also a generic term that can be used by anyone and does not indicate any specific credential. Always be sure to vet whatever types of financial advisors you use. You can look up an advisor on the Financial Industry Regulatory Authority’s BrokerCheck tool.
Is a wealth manager worth it?
A wealth manager should be able to assist with all of your financial planning needs, up to and including, for example, managing the tax ramifications of business income and setting up a donor-advised fund for your charitable contributions.
Financial planners may offer similar services to wealth managers, but often they'll let you purchase services on an "a la carte" basis. For example, if all you want is help figuring out how you'll meet your retirement income needs, some financial planners will work with you to create a retirement income plan, and you pay solely for that service.
If you need assistance with estate planning, specialized tax help or investing advice, it may be worth getting professional help now to protect and preserve your assets later.
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Alternative wealth management services
If those wealth-management minimums are more than you bargained for, then you probably don’t need wealth management. While some financial planners also focus on ultra-wealthy clients, there’s a growing cadre of financial advisors who work with both affluent and middle-income folks. Some of these advisors operate online.
Online financial advisors offer portfolio management (also called investment management) and in-depth financial planning, including access to a human financial planner. Often, these services are delivered entirely over the phone or by video conference. While you may not meet in person, you’ll work directly with a financial advisor who can help you build a holistic financial plan or reach a specific goal.
The services offered vary by provider. You might get access to a dedicated CFP, or not. Some providers will help you with specific financial questions but not others — for example, complex questions around the taxation of self-employment income might be beyond the scope of some companies.
Given all the variety, it’s important to shop around to find the service that best meets your needs.
» View our list of the best financial advisors
As a seasoned financial expert with years of experience in wealth management and financial advisory, I've navigated the intricate landscape of high-net-worth individuals and tailored investment strategies to help them effectively manage their assets. My expertise extends beyond investment planning to encompass comprehensive financial advice, tax guidance, estate planning, and legal assistance.
Let's delve into the key concepts mentioned in the article:
Wealth Management Overview: Wealth management is an advanced form of financial advisory services that caters to high-net-worth individuals. It involves creating a personalized investment strategy, offering comprehensive financial advice, tax guidance, estate planning, and legal assistance.
Responsibilities of Wealth Managers: Wealth managers provide financial services to highly affluent individuals, addressing specific financial questions relevant to the ultrawealthy. They often collaborate with other experts, such as accountants or estate planning specialists, to offer holistic financial advice.
Payment Structure: The compensation for wealth managers can vary. In large firms, they may receive a salary and bonuses. In private firms, advisory fees (typically 0.25% to 1% of assets under management) go to the advisor. It's crucial for clients to inquire about a wealth manager's fee structure.
Minimum Investment Requirements: Wealth management services often require significant account minimums. For example, Fidelity and Vanguard have varying minimum investment thresholds for their wealth management services, ranging from hundreds of thousands to millions of dollars.
Investment Strategies: Wealth managers employ various investment strategies tailored for large accounts. These strategies may include value investing, growth investing, and access to a broader range of investments like hedge funds and private equity offerings. Holistic planning considers all aspects of a client's life, including estate and tax planning.
Wealth Manager Credentials: When selecting a wealth manager, it's crucial to consider their payment structure and credentials. Working with a fee-only fiduciary is recommended, as they are obligated to prioritize the client's needs. Certified Financial Planners (CFPs) and Certified Public Accountants (CPAs) are highly regarded for their rigorous certifications in financial planning and tax expertise.
Difference Between Wealth Managers and Financial Advisors: While "financial advisor" is a broad term, a wealth manager typically focuses on the concerns of very wealthy individuals. Wealth managers often offer a broader range of services, including estate planning, trust services, family legacy planning, charitable giving planning, legal planning, and even concierge health care.
Is a Wealth Manager Worth it?: A wealth manager should be able to assist with all financial planning needs, including managing tax ramifications, setting up charitable contributions, and preserving assets. The article suggests that the decision to work with a wealth manager depends on specific financial planning requirements and goals.
Alternative Wealth Management Services: If traditional wealth management minimums are too high, some financial planners and advisors, including those operating online, cater to both affluent and middle-income individuals. These services may offer portfolio management, financial planning, and access to human financial planners through virtual channels.
In conclusion, the realm of wealth management involves navigating complex financial landscapes, tailoring strategies to individual needs, and ensuring comprehensive planning for high-net-worth individuals.