Wealth management is a comprehensive service focused on taking a holistic look at a client’s financial picture, including services such as investment management, financial planning, tax planning and estate planning.
Wealth management is generally considered a “high-end” type of service, and some wealth management firms may require a certain level of investment assets or a minimum net worth. For clients who need this level of service, it can be useful to consolidate all types of financial advice in one place with just one firm.
Key wealth management objectives
The objectives of wealth management will vary depending on the investor. Each client’s needs and situation are different, and good wealth advisors will tailor their advice accordingly.
Some key wealth management objectives for clients include:
- Setting financial goals and designing strategies to achieve those goals
- Helping clients maximize their overall wealth
- Helping clients maintain their wealth
- Managing their investments and finances
- Reducing the tax impact of wealth building
- Setting strategies for passing on their wealth, also known as estate planning
What is wealth management?
Wealth management is a holistic service that focuses on helping mid- to high-net-worth clients grow their wealth, manage their liability exposure and devise strategies to pass their wealth on to their designated heirs. Wealth management services take a comprehensive approach to the financial situation of higher-net-worth clients, versus working with an advisor focused solely on financial planning or investment management.
Some typical services offered by wealth management firms include:
- Investment management and advice
- Comprehensive financial planning
- Tax planning and accounting services
- Estate planning
- Philanthropic planning
- Legal services
- Retirement planning
Some of these services may be offered in conjunction with an outside partner, however. Legal services are a prime example.
How much money is required for wealth management?
There are no hard and fast rules regarding how much is required for an investor to obtain wealth management services. Any minimums in terms of investable assets, net worth or other metrics will be set by individual wealth managers and their firms.
That said, a minimum of $2 million to $5 million in assets is the range where it makes sense to consider the services of a wealth management firm. Much below that and it might be hard to justify the expense of this type of service.
Again, these minimum levels will vary by firm. They may also vary a bit by your circumstances. For example, a wealth manager may want to take on the children of some of their current larger clients to help ensure the wealth they inherit stays with their firm. They may also want to establish solid relationships with younger professionals such as doctors or attorneys to retain their business once they start to earn much higher incomes.
How to choose a wealth manager
When choosing a wealth manager to work with, you’ll want to look at several things.
First, does the wealth management firm work with clients like you? Some wealth managers may focus on clients of a certain type. If your situation doesn’t fit with that type of client, then that particular wealth manager may not be a good fit for you.
Second, you’ll want to look at the manager’s qualifications. Some criteria you might use in selecting a wealth manager include:
- What professional designations do they hold? Examples might include CFP (Certified Financial Planner), CPA (Certified Public Accountant), CFA (Chartered Financial Analyst).
- What is their level of experience in the wealth management space?
- What services does the firm offer?
- How often do you expect to communicate with them?
- What types of fees do they charge?
- Are they independent or part of a larger firm?
This table summarizes the basic differences between wealth managers, portfolio managers and financial advisors.
| WEALTH MANAGER | PORTFOLIO MANAGER | FINANCIAL ADVISOR |
| A wealth manager provides comprehensive, holistic advice in a broad range of financial and related areas. These include: InvestmentsTax and accounting servicesEstate planningRetirement planningComprehensive financial planningLegal and estate planningPhilanthropy | A portfolio manager is focused on investment management and generally doesn’t offer advice or services in other areas. This professional focuses on: Selecting investmentsPortfolio managementTax-loss harvestingCash management | Financial advisor is a term that can encompass a number of services. Financial advisors often provide advice on investments, financial planning, retirement planning and other related areas. This professional focuses on: Financial planningBasic retirement planningTax planningInvestments |
Wealth management strategies
Wealth management strategies will vary based on the specific needs of the client. Overall, the reason to use a wealth management firm is to seek strategies to help maintain and grow your total wealth. This can mean different things to different people. Some individuals are more focused on keeping their wealth than growing it, for example, and so the wealth manager would design safer strategies focused on that objective.
In general, wealth management entails coordinating all the moving parts of a client’s financial situation into a comprehensive wealth plan. This might include the client’s tax situation, investments and retirement planning.
Examples of wealth management strategies include:
- Developing a comprehensive investment strategy covering all of the client’s various types of investment and retirement accounts.
- Coordinating an optimal tax planning strategy into their wealth planning.
- Ensuring that the client’s estate plans reflect their desires.
- Developing a succession plan for business owner clients.
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Alternatives to wealth management
If the fees or asset minimums required by most wealth management firms seem too high for you, your situation is probably not a good fit for a wealth manager. For those whose situation may not be right, there are other options for getting financial advice:
- Empower is an online advisory and wealth management firm that offers a number of services with lower minimums and fees than a traditional wealth management firm.
- Vanguard Personal Advisor Services is a service offered by Vanguard that provides advice and planning to clients.
There are a number of other online financial advisory services and apps that have popped up in recent years offering a wide range of services that range from very basic financial advice to some aspects of what would be considered wealth management. Robo-advisors have grown in popularity in recent years and might offer a lower-cost alternative if you are not yet at a place financially where the service of a traditional wealth management firm is feasible for you.
How to find a wealth manager
Once you’ve determined that you need a wealth manager to help you navigate your financial needs, you’ll need to find a few firms to meet with before deciding which one you’ll hire. Finding a wealth manager can be a daunting task. Some areas have dozens of firms to choose from and narrowing down the list can be tough, while other areas may not have any firms nearby.
Here are some tips for finding a wealth manager in your area:
- Check with friends and family to see if they use a wealth manager and can recommend one to you. They can also provide an honest assessment of their firm’s service.
- Financial publications sometimes provide annual lists of the best wealth management firms in a given area. Consider checking these sites to find a highly ranked wealth manager near you.
- Bankrate’s financial advisor matching tool can also help you identify advisors who may be able to provide wealth management services.