What Is Wealth Management And Do You Need It? | Bankrate (2024)

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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 maintain and maximize 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 money, 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 circ*mstances. 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, such as doctors or lawyers. 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. Here are some questions to consider when selecting a wealth manager:

  • 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 MANAGERPORTFOLIO MANAGERFINANCIAL ADVISOR
A wealth manager provides comprehensive, holistic advice in a broad range of financial and related areas.These include: Investments Tax and accounting services Estate planning Retirement planning Comprehensive financial planning Legal and estate planning PhilanthropyA portfolio manager is focused on investment management and generally doesn’t offer advice or services in other areas.This professional focuses on: Selecting investments Portfolio management Tax-loss harvesting Cash managementFinancial 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 planning Basic retirement planning Tax planning Investments

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.

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.

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.

There are a number of other online financial advisory services and apps that offer a range of services, 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.

FAQs

  • Wealth managers provide holistic financial advice to help their clients grow and protect their wealth. This advice goes beyond just providing advice on a client’s investments or designing a financial plan for them. 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.

  • 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.

  • 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.

What Is Wealth Management And Do You Need It? | Bankrate (2024)

FAQs

What Is Wealth Management And Do You Need It? | Bankrate? ›

Wealth managers provide holistic financial advice to help their clients grow and protect their wealth. This advice goes beyond just providing advice on a client's investments or designing a financial plan for them. Wealth managers generally work with clients with a higher net worth than a financial planner might.

Do you really need wealth management? ›

You might not need a wealth manager if you have clear goals and are confident you can create and implement strategies to protect and grow your wealth. However, a wealth manager may be a good idea if you have substantial assets, would benefit from an expert, and have questions you need help answering.

How much money do you need for wealth management? ›

There isn't a hard-and-fast rule for how much money you “need” to get started with wealth management, but generally speaking, this is most beneficial for people with a net worth of $250,000 or more. It's also strongly recommended for business owners.

Why do I want to go into wealth management? ›

One of the most fulfilling aspects of a career in wealth management is the opportunity to build meaningful relationships with clients. As a wealth manager, you will work closely with your clients to understand their financial goals, values, and priorities, and help them develop a plan to achieve their objectives.

Is a wealth advisor worth it? ›

A financial advisor is worth paying for if they provide help you need, whether because you don't have the time or financial acumen or you simply don't want to deal with your finances. An advisor may be especially valuable if you have complicated finances that would benefit from professional help.

Is a 1% wealth management fee worth it? ›

But, if you're already working with an advisor, the simplest way to determine whether a 1% fee is reasonable may be to look at what they've helped you accomplish. For example, if they've consistently helped you to earn a 12% return in your portfolio for five years running, then 1% may be a bargain.

What are the disadvantages of wealth management? ›

Cons of Private Wealth Management

There is also always the risk of misalignment between your financial goals and the wealth manager's incentives. Some wealth managers may prioritize products or investments that generate higher commissions or fees which might not always align with your best interests.

What is the net worth to be considered wealthy? ›

According to Schwab's 2023 Modern Wealth Survey, Americans perceive an average net worth of $2.2 million as wealthy​​​​. Knight Frank's research indicates that a net worth of $4.4 million is required to be in the top 1% in America, a figure much higher than in countries like Japan, the U.K. and Australia​​.

At what net worth should I get a financial advisor? ›

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

What are the top 5 wealth management companies? ›

The top 5 are: 545 Group, Jones Zafari Group, The Polk Wealth Management Group, Hollenbaugh Rukeyser Safro Williams, The Erdmann Group.

Is wealth management for rich people? ›

Because of its comprehensive nature, wealth management is typically reserved for individuals who are at least above the high-net-worth threshold. This is generally seen as someone who has at least $750,000 in investable assets or a $1.5 million net worth.

How do wealth managers make money? ›

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 bonuses. If you are working with a private firm owned by an advisor, any advisory fees (generally 0.25% to 1% of assets under management) would go to the advisor.

Do people in wealth management make a lot of money? ›

Large National Firms

Wealth managers at top Wall Street brokerages and wirehouses typically earn the highest salaries in the industry. Base salaries at these large national firms often start around $100,000 for junior roles and can exceed $300,000 for senior positions.

Is 2% fee high for a financial advisor? ›

Most of my research has shown people saying about 1% is normal. Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.

Who do rich people hire to handle their money? ›

When you have a fathomless bounty of wealth, money doesn't quite register as an expense until you add a lot of zeros to the end — so spending a lot to save a lot is a no brainer. It's why the mega-rich often hire expensive tax lawyers, wealth managers, or even set up a whole office dedicated to tax strategy.

Is there a difference between wealth management and financial advisor? ›

Wealth managers are just a subset of financial advisors. The thing that sets them apart from other advisors is their clientele. Wealth managers primarily serve high-net-worth and ultra-high-net-worth individuals. And as the title implies, they usually manage large amounts of wealth for these clients.

At what net worth do you need a financial advisor? ›

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

What is considered high-net-worth? ›

Typically, a high-net-worth individual has assets of between $1 million and $5 million. Those with multi-million dollar fortunes, generally assets of at least $30 million, are sometimes identified as ultra-HNWI (UHNWI). The term “net worth” factors in liquid or investable assets.

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