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Wealth management is the highest level of financial planning services. It generally includes comprehensive investment management alongside financial advice, tax guidance, estate planning and even legal assistance. In fact, many private wealth managers will coordinate with other financial experts — such as accountants or estate planning specialists — on behalf of clients to offer comprehensive financial advice.
The type of service offered by a wealth management firm is best suited to affluent clients. But while you may not require wealth management now, your needs are likely to change over time. At some point, it may be time to look into wealth management.
Wealth management definition
Wealth management is the most advanced form of investment advisor services. A wealth advisor typically creates a specially tailored investment strategy and plan for their clients to help them manage their assets.
What does a wealth manager do?
Wealth managers generally aim their services at the highly affluent and may have expertise in the types of financial questions that affect the ultrawealthy, such as how to avoid the estate tax. They often coordinate services among different experts, such as working with a lawyer or an accountant on your behalf. Rather than seek out multiple professionals, you can work with a wealth manager who might coordinate with other experts on your behalf.
For instance, a wealthy individual who has been married and divorced, owns multiple properties and has a plethora of investments and accounts to manage may need expertise in legal matters, property taxes and investments. A wealth manager could create a holistic 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 possible bonuses. If you are working with a private firm owned by an advisor, any advisory fees (generally around 1%) 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.
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.
How much money do you need for wealth management?
In short: A lot. 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 and requires a $250,000 account minimum.
Vanguard, another online brokerage, offers a range of financial advice services; the one it describes as “wealth management” requires a $5 million minimum.
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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. Wealth managers 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 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.
“A wealth manager should understand that an individual with a higher net worth has more complex needs, and that should be taken into account when determining an appropriate strategy for that person,” says Aimee Kwain, vice president of advanced planning at Fidelity.
“Conversely, someone with a more complex financial situation should make sure they ask the right questions and select the wealth manager best equipped to help them create a financial plan covering all of their needs, from investments to estate planning.”
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.
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 estate planning, specialized tax help or investing advice, it may be worth getting professional help now to protect and preserve your assets later.
Wealth management alternative: Online financial planning 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.