Who are Wealth Managers and What Makes them Different?

While wealth managers are categorized under the umbrella term of financial advisors, the scope of a wealth manager’s role goes beyond giving investment advice. A wealth manager not only focuses on generating returns on investments for his clients but also offers services that encompass every other financial aspect of wealth management. This includes financial planning, accounting, taxation, retirement planning, estate planning, etc. In other words, hiring a personal wealth manager would mean availing yourself of one of the highest levels of financial planning services for your wealth.

In this article, we shall explore the basics of wealth management, what wealth managers do, and why and how they are different. We will also tackle the question of whether you need a personal wealth manager or not.

What is wealth management?

An advanced form of financial service, wealth management is a service predominantly provided to high net-worth individuals (HNIs) and ultra-high net worth individuals (UHNWIs). Typically, HNIs are defined as those holding liquid financial assets with an investible value greater than $1.5 million; very high net worth individuals have more than $5 million in liquid assets, and UHNWIs have investible assets of at least $30 million, excluding their assets and property.

The sheer size of the investment entails that a personal wealth manager is hired to calculate and make precise allocations to preserve and grow wealth.

Who are wealth managers?

Wealth managers or wealth advisors are financial experts to whom the rich and affluent turn to when they need financial assistance. Personal wealth managers work with people whose financial needs are extensive and go beyond just portfolio management. Personal wealth managers cover all fields of financial services – planning, banking, taxation, legal guidance, retirement, and estate. While there is no qualification or certification needed to work as a wealth manager, wealth managers usually hold various licenses and certifications.

A wealth advisor typically creates a specialized and tailored investment strategy and plan for their clients to help them successfully manage their assets and mitigate risks, including ones of legal nature. At the end of the day, the goal of a wealth manager is to grow and preserve the wealth of the client over the long term.

What are the services offered by wealth managers?

Every wealth manager and firm has their own set of services to offer. They have their own areas of expertise as well. A client can select services based on his or her needs. Alternatively, a wealth advisor can suggest services that one should sign up for. Here is a breakdown of the services generally offered by a wealth management firm or a wealth management advisor:

– Advice on investment and financial planning

– Comprehensive long-term financial planning, including insurance

– Estate planning

– Trust services

– Tax planning

– Family legacy planning

– Philanthropic planning service

– Risk management

– Retirement planning

– Health care

– Legal guidance and advice

– Banking services

In addition to the above, a personal wealth manager may also serve as a representative of the client at places where money matters come into the picture. This involves financial planning with other experts, setting up financial meetings, coordinating financial communications and relationships, and serving as a personal advisor and guide during volatile times.

How much money do you need to hire a wealth manager?

While there is no consensus on a minimum amount, wealth managers are usually hired for clients with large amounts of liquid assets that can be invested. The US Securities and Exchange Commission (SEC) defines a high-net-worth individual as someone who has at least $750,000 in assets under management (AUM) or has a net worth of $1.5 million or more. As such, wealth management firms require their prospective clients to have a certain investible figure before they agree to manage the client’s account. This minimum investible amount varies depending on the wealth management firm.

How much does a wealth manager charge?

A personal wealth manager usually charges a set annual fee. Mostly, this fee is charged as a percentage of the client’s overall assets under management. The industry average fees are generally around 1%, but again this could vary depending on the firm.

Some wealth managers may charge a fixed fee or even an hourly rate. Some may even charge a combination of the two. If you’ve opted for the percentage plan, do check what you’re paying for as the percentage fee may not include expenses such as brokerage, funds, and trading.

Concerned about the costs involved in hiring a wealth manager to manage your finances? Read more on our article Are Wealth Managers Worth the Cost? to ensure that you are paying for services that are most suited to your financial needs and goals.

Do you need a wealth manager?

If you’ve amassed a good amount of wealth and you want to take care of it, not just for the present, but for the future as well, or you have investible money of more than $1.5 million, it is recommended that you consider hiring a personal wealth manager. Managing a large corpus of funds could be stressful for an individual. One needs to be prudent in spending while also making wise investing decisions to protect and grow their money.

Traditionally, many HNWIs have employed several different professionals such as a tax consultant, legal counsel, investment advisor, etc., for their expertise and then worked hard to keep it seamless between the professionals. They also had to keep track of all the activities and executions of the advisors individually to ensure their work was in line with their expectations and that their wealth was ultimately growing.

However, new age HNWIs and UHNIs have transitioned to a more relaxed workspace by engaging with a wealth manager or a wealth management firm. If you think you require someone who can provide unbiased counsel for your assets and help with a holistic approach towards growing your wealth, then a wealth manager is most suited and can help you achieve your goals.

Are wealth managers financial advisors?

Yes, wealth managers are a form of financial advisor. A wealth manager’s function is very specific, whereas a financial advisor is more of a general term for someone offering financial assistance. Wealth managers mostly take on only HNWIs and the ultra-rich, as their area of specialization lies in managing a large corpus of investible money. Financial advisors may provide a variety of services ranging from financial planning, investments, tax planning, retirement planning, etc., depending on their experience and capability. However, you should note that neither of the two designations requires any sort of formal accreditation. That said, many wealth managers are certified as a CFA or CFP. It is recommended that you be mindful that a Registered Investment Advisor (RIA) or a fiduciary advisor will offer you the highest level of commitment and service, and therefore, hiring a wealth manager who is registered as an investment advisor with the Securities and Exchange Commission in their state could be your best option for managing your wealth.

Should you hire a wealth manager?

This is an important question to consider, especially considering the price tag a wealth manager’s services come with. A personal wealth advisor will be helpful if you have a large investment to make, or your liquid asset value is more than $1.5 million, and if you require help managing your wealth. Most private wealth advisors charge 1% of the assets, which could be a sizable amount to spend every year. Some advisors may also add further costs such as an investment expense amount or transaction fees, etc., taking your final cost of engaging a wealth manager to an even higher amount. This will be significantly more when compared to an investment agency or any other kind of financial advisor.

When deciding to hire a wealth manager, you have to factor in your financial situation and financial goals. Do you have the time and acumen to comfortably manage your wealth? Would you rather entrust your assets to the hands of a team of experts, or would you be more comfortable with one wealth manager serving all your financial needs? Remember that while you are paying one person or firm, you are paying for many services that are comprehensive and all-encompassing. Importantly, you and your prospective financial advisor should be on the same page and understand your financial goals and requirements.

The Bottom line: Wealth Managers and You

Wealth planners perform their role with a focus on one specific goal – advising the ultra-rich on how to grow their assets optimally. This inherently makes them experts on all the functions of financial management. Therefore, wealth managers charge a higher fee than generic financial advisors. It is up to you to decide if you are comfortable managing your assets or if you would prefer to hire a wealth manager to help you grow your assets further.

It is also prudent to ask yourself certain questions before you engage a wealth manager: Is this advisor trustworthy and transparent with his or her dealings; does he or she have a clean record in past dealings? Are there any recommendations or references for the effectiveness and efficiency of this wealth manager? Does this wealth planner understand my objectives, aims, and goals? How will I be charged, and what are the costs involved?

Do not forget to look at the wealth manager’s advisory certifications. This will add credibility to their services and will help you in making decisions.

Ask the right questions to conclude whether the wealth manager gets a grasp of your situation and goals. Both you and the wealth manager must have a clear picture of what you’re going to work with and work toward. Keep these pointers in mind if you do decide to search for and find a suitable wealth planner.

Are you looking for a qualified fiduciary to help you plan your finances? Answer a few simple questions and Paladin Registry’s match service will match you with a list of  1-3 certified financial professionals for free. You may check their credentials and qualifications and set up a free initial consultation before you decide to hire your chosen financial advisor.

To learn more about the author William Hayslett view his short bio.

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