Wealth management as an investment-advisory discipline incorporates financial planning, investment portfolio management and a number of aggregated financial services. High-net-worth individuals (HNWIs), small-business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate retail banking, estate planning, legal resources, tax professionals and investment management.
Wealth managers can have backgrounds as independent Chartered Financial Consultants, Certified Financial Planners or Chartered Financial Analysts (in the USA), Chartered Strategic Wealth Professionals (in Canada), Chartered Financial Planners (in the UK), or any credentialed (such as MBA) professional money managers who work to enhance the income, growth and tax-favored treatment of long-term investors. One must already have accumulated some amount of wealth for wealth management strategies to be effective.
Historically the entry bar was high, however recently due to innovations such as exchange-traded funds, increased transparency in product design and more and more investors managing their own investments, this entry bar is coming down. However, several firms offer this service to minimum investments of $1M down to £100K.
What it is:
How it works/Example:
Wealth management combines both financial planning and specialized financial services, including personal retail banking services, estate planning, legal and tax advice, and investment management services.
The goal of wealth management is to sustain and grow long-term wealth. The net worth needed to qualify for wealth management services vary among institutions, but the net worth threshold typically starts at about $20 million. Also, depending on the institution, the range of services available is highly customizable in order to meet the specific needs of the client.
Why it Matters:
Wealth management clients are highly sought after by financial institutions and financial service companies. Many banks that combine traditional banking and wealth management services have specialized sales and service teams to specifically cater to wealth management clients.
The term “wealth management” is thrown around plenty, in the boardrooms of private client firms, in trade and mainstream articles and by financial advisors in front of clients. Still, most professionals are hard pressed to actually define the term with any degree of precision.
Wealth management is very straightforward. From the affluent individual’s perspective, wealth management is simply the science of solving/enhancing his or her financial situation. From the financial advisor’s perspective, wealth management is the ability of an advisor or advisory team to deliver a full range of financial services and products to an affluent client in a consultative way.
Theoretically, a wealth manager can provide every single financial product in existence. In reality most wealth managers specialize in services and products they feel most comfortable with.
A further defining quality of wealth management is that it is delivered in a consultative manner. By being consultative, wealth managers are truly client-centered. A good wealth manager meets a client without any presupposition about what financial products or services are appropriate for that affluent individual.
While it is common for a wealthy individual to be sitting with a wealth manager to address a particular need (investment management, say), the consultative wealth manager’s overriding objective is to understand the person and find out what’s important and why. Then the wealth manager is able to bring in the appropriate experts and provide the appropriate financial products.
Wealth management is the consultative process of meeting the needs and wants of affluent clients by providing the appropriate financial products and services.
Wealth management entails coordinating a team of experts to address the needs and wants of affluent clients.
There’s considerable research showing the income advantages of financial advisors who are wealth managers to those that are principally investment oriented. In general, a financial advisor transitioning to a wealth manager will see profits increase by 35 percent or more within a year. Hence, if a financial advisor’s annual income was $250,000 before becoming a wealth manager, his or her annual income will be $337,500 within a year.
That said, not all financial advisors are good candidates for becoming successful wealth managers. Many financial advisors are doing quite well running money, for instance, and are not inclined by temperament or preference to transition to becoming wealth managers. At the same time, it’s very important to realize that wealth management is not for all affluent individuals. It’s usually appropriate for the wealthy with diverse needs and wants.