What Is Wealth Management?

Wealth management takes a holistic or integrated approach to manage your overall assets and financial plans. Kowit Lanchu/Shutterstock

Most people want their money and possessions to grow. Or at least they want their assets to hold their value. Wealth management helps to do just that. It takes a holistic or integrated approach to manage your overall assets and financial plans.

Through a wealth manager, you can review and make decisions to grow your wealth. But how does wealth management work?

Wealth Management and Its Goals

The main goal of wealth management is to achieve financial security and protect and grow your wealth. A wealth manager is a licensed professional that provides more than just investment advice. They approach your wealth holistically.

Their main goal is to help you maximize your overall wealth. But to do this, tax planning with accounting services and legal services must be provided. Another goal is complete retirement planning as well as estate planning.

Wealth Manager vs. Financial Planner

Although there is some overlap, a wealth manager and financial planner are different and provide unique services.

The main difference between the two is that wealth managers manage wealth. In contrast, financial planners manage finances so that clients can get ahead.

It’s the difference between managing a portfolio and developing financial goals with a plan.

A wealth manager is usually more advanced and experienced.

Services Provided by Wealth Managers

A wealth manager develops an investment-management plan according to your goals and risk tolerance. He or she also can help with financial planning, including spending and saving goals. This is ongoing as your situation changes.

Estate planning is also an element in wealth management. Determining what will happen and who will inherit your estate is part of the wealth-management process. The plan could encompass initiating and managing a trust or creating a will.

Structuring your finances to minimize tax liability is imperative. This is especially true if you have multiple income streams. Wealth management addresses this.

Wealth-Management Strategies

Depending on your needs, wealth-management strategies will vary. Maintaining and growing wealth means different things to different people.

Coordinating all the moving parts of your well-being takes a comprehensive financial plan. For example, a wealth manager may concentrate on asset diversification and varied asset allocation.

Diversification means investing in various assets to minimize the consequences of losses in one asset. While varied asset allocation means choosing different asset categories like bonds and stocks.

A wealth manager will also keep an eye on rebalancing to ensure assets keep the original risk.

And they keep an eye on taxes. Tax-loss harvesting is also a strategy.

By using a wealth manager, this is taken care of for you. It saves you from having to self-monitor and possibly having an item fall through the cracks.

Choosing a Wealth Manager

Experience, reputation, and credentials are essential qualifications for choosing a wealth manager.

They, of course, must be licensed. But it goes beyond that. Beware if they have a certificate or not. There’s a difference between a one-time certificate and a certification. A certification is ongoing. Some certifications include, among others:

• Certified Investment Management Analyst (CIMA)
• Certified Private Wealth Advisor (CPWA)
• Chartered Financial Analyst (CFA)

Ask to see their resumé and references. How long have they been a wealth manager? Inquire what type of clients they have and at what stage of their lives they are currently.

If you’re a small business, ask about other small businesses the wealth manager works with. You don’t need names, but types and sizes of the businesses are important to garner the wealth manager’s experience.

How are their communications skills? If they use a lot of jargon, it may be challenging to know exactly what they are saying. Can they put important concepts in laymen’s terms? And test the waters as to how flexible they are to your needs. For example, if you say no to a plan, will they argue with you or develop one you feel more comfortable with.

Wealth-Management Fees

It’s important to know the fees and how they are structured. As of 2022, in general, a wealth-management fee is 1–2 percent per year for every $1 million in assets.

But there can be additional fees, and some wealth managers are commission based.

Ask for a detailed fee breakdown, so you know what your ultimate costs will be.

Is Wealth Management Needed?

Whether you need a wealth manager depends on your financial circumstances and goals. It’s usually for those with considerable assets. There is a minimum amount of assets required.

Ask yourself if you’re confident managing your finances. Do you feel you’re qualified to make decisions?

You could work with a different CPA, attorney, estate planner, and stockbroker. But that would mean taking the time to coordinate all the financial pieces. It’s your choice.

Other Options to Wealth Management

There are other options to hiring a wealth manager.

One option is a robo adviser. A robo adviser is a digital financial adviser that provides automated investing services, which are algorithm-driven. It takes a number-driven approach, void of emotion, to creating an investment strategy. It’s based on your financial goals and risk tolerance.

But although the robo adviser handles your portfolio, it doesn’t offer the other services a wealth manager provides. The robo adviser charges lower fees. In 2022, they are generally around 0.25–0.89 percent of assets under management (AUM).

Another option is a hybrid robo adviser. This combines a human-managed account using the help of a robo advisory service.

Meetings with the wealth manager are through phone or video calls. This lowers the price. A hybrid robo adviser in 2022 runs about 0.30–0.89 percent AUM fee. There are minimums.

Wealth Management and Uncertainty

There is some ambiguity in wealth management. It’s imperative to choose the best scenario that serves your circumstances. Be cautious and do your research. You want to select a wealth manager with the credentials and experience to achieve your financial goals and protect your assets, even during volatile and uncertain times.