What is wealth management and do you need it?

Wealth management is a comprehensive service focused on taking a holistic look at a client’s financial picture. It is generally considered a “high-end” 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 a single firm.

What is wealth management?

Wealth management is a holistic service that focuses on helping mid- to high-net-worth clients grow their money, manage their liability exposure and devise strategies to pass their wealth on to their designated heirs. Wealth managers take a more comprehensive approach compared to an advisor focused solely on financial planning or investment management.

Some typical services offered by wealth management firms include:

• Investment management and advice
• Financial goal-setting
• Comprehensive financial planning
• Tax planning and accounting services
• Estate planning
• Philanthropic planning
• Legal services
• Retirement planning
• Business succession planning

Some of these services may be offered in conjunction with an outside partner, however. Legal services are a prime example.

Key wealth management objectives

The objectives of wealth management will vary depending on the investor. The primary goal is to help clients maintain and maximize wealth through comprehensive planning.

Wealth management strategies

Wealth management strategies will vary based on the specific needs of the client. Some clients may want to focus on preserving wealth, while others may still be in the wealth-building stage.

How much money is required for wealth management?

Wealth managers work with a range of clients, but a minimum of $2 million to $5 million in assets is the range where it typically makes sense to consider the services of a wealth management firm.

Wealth management may be suitable for:

• High-net-worth individuals
• The children of high-net-worth individuals who are still building assets
• Professionals in high-paying fields

How to choose a wealth manager

Choosing the right wealth manager is essential to meeting your goals. To do so:

1. Research wealth managers in your area to see what minimum asset requirements they have and what services they offer. Ask friends and family for recommendations. Bankrate’s financial advisor matching tool can also help you identify advisors who provide wealth management services.
2. Review wealth managers’ qualifications, such as certifications they hold. Examples include CFP (certified financial planner), CPA (certified public accountant) and CFA (chartered financial analyst).
3. Decide whether you want to use an independent wealth manager or someone who’s part of a larger firm.
4. Understand your wealth manager’s fee structure.

This table summarizes the basic differences between wealth managers, portfolio managers and financial advisors.

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. However, 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.
• A financial advisor can help you work toward your personal goals if your net worth doesn’t require wealth management. There are also online financial advisory services and apps that offer a range of financial services.
• Robo-advisors have grown in popularity in recent years as well and may offer a lower-cost alternative if you’re not ready to work with a wealth management firm.
• An accountant or CPA can help you with tax planning and strategies.
• An estate-planning attorney can help you pass assets down to your heirs.

Frequently asked questions

• What does a wealth manager do?

  Wealth managers provide holistic financial advice to help their clients grow and protect their money. This goes beyond just providing advice on a client’s investments or designing a financial plan. Wealth managers generally work with clients with a higher net worth than a financial planner might. They often work with professionals in related areas, such as tax professionals and attorneys, to help design a comprehensive wealth-planning strategy for their clients.

   

• How does a wealth manager get paid?

  Wealth managers may be paid in a variety of ways. Two common compensation methods are a flat-fee arrangement or compensation based on a percentage of client assets under management.

• What is the difference between a wealth manager and a financial planner?

  Financial planner is a term that can mean a lot of things. Financial planners usually focus only on doing financial planning for their clients. Wealth managers provide comprehensive, cross-disciplinary services for their generally high net worth clients. Financial planning is just a first step in most cases. Wealth managers integrate this with tax planning, investment advice, estate planning and other services to help clients achieve their goals.

Bottom line

Wealth management is all about safeguarding your future, achieving your goals and preserving your legacy. Many people don’t have the capital needed to meet with a wealth manager, but for those who do, this service can provide a host of long-term benefits.

— Bankrate’s Rachel Christian and Maurie Backman contributed to an update of this article.