What Is Wealth Management?
Let me explain wealth management directly to you: it's an investment advisory service designed specifically for affluent clients, combining various financial services to meet their unique needs. As a wealth manager, I would start by gathering details about your goals and situation through a consultative process, then craft a personalized strategy using a mix of financial products and services.
This approach is comprehensive, often including money management, financial planning, investment advice, estate planning, accounting, life insurance, retirement, and tax services. Fees typically depend on your assets under management (AUM), and it's most suitable if you have substantial wealth and diverse financial requirements.
How Wealth Management Works
Wealth management goes beyond simple investment advice; it covers every aspect of your financial life. Instead of dealing with multiple professionals for different needs, you benefit from an integrated approach where one source manages everything. I coordinate services to handle your assets and create a strategic plan for both current and future requirements, such as will and trust services, business succession, or wealth transfer.
Some wealth managers specialize in areas like cross-border management, drawing on their expertise or the firm's focus. In practice, I might bring in outside experts, like your attorney or accountant, to optimize the strategy. Additionally, services can extend to banking or philanthropic advice, ensuring all parts of your financial picture align.
An Example of Wealth Management
Consider this scenario: you have $10 million in investable assets, a trust for your grandchildren, and a recently deceased partner. In a wealth management setup, I wouldn't just invest those funds in a discretionary account; I'd also handle will and trust services to minimize taxes and plan your estate effectively.
For ultra-high-net-worth individuals, a family office might take this further, offering budgeting help, financial education, and even concierge services for non-financial matters like household management or travel arrangements. This illustrates how wealth management adapts to substantial wealth's complexities.
Business Structures in Wealth Management
Wealth managers operate within small businesses or larger firms tied to the financial industry, and they might go by titles like financial consultant or advisor. You could work with a single designated manager or a team, depending on the setup.
Expertise varies: those at investment firms might excel in strategies, while bank-based managers focus on trusts, credit, estate planning, or insurance. Keep in mind that automated roboadvisors offer similar tools at lower costs—often under 1% AUM with low minimums—but they're geared toward everyday users, not the affluent.
Fees for Wealth Management Services
Fees in wealth management come in different forms, and you need to understand them upfront. Some managers are fee-only, charging annual, hourly, or flat rates; others earn commissions from sold investments, or a mix of both.
Typically, the median fee is around 1% for up to $1 million in AUM, though it can be higher for smaller accounts and lower for larger ones. This structure ensures alignment with your asset growth.
Credentials to Look For
When selecting a wealth manager, check their credentials to match your needs. Top ones include Certified Financial Planner, Chartered Financial Analyst, and Personal Financial Specialist. Use certifying organizations' websites to verify standing and any complaints.
FINRA's tool can help you understand designations, including continuing education requirements and complaint processes. This due diligence ensures you're working with a qualified professional.
Frequently Asked Questions
- What do wealth managers earn? According to recent data, the average salary for a wealth manager in the US is about $132,000 as of 2024.
- Is a wealth manager the same as a financial planner? Not exactly; wealth managers focus on assets and investments, while financial planners cover broader areas like household finances and insurance.
- How much money does the wealth management industry manage? Globally, it's over $128.9 trillion in assets under management as of 2024, projected to reach $145.4 trillion by 2025.
The Bottom Line
In essence, I develop a plan to maintain or grow your wealth based on your situation, goals, and risk tolerance. Every element, from tax planning to estates, gets coordinated to protect your assets and help you succeed.
Regular meetings allow us to update goals, rebalance portfolios, and explore additional services. The aim is a lifelong partnership to support your financial journey.
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