Wealth management: do you need a wealth manager?

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Wealth Management is the first echelon of the financial advisory industry and serves as a one stop shop for those who fall into the high net worth or high net worth category.

Related: Reach your financial goals with dedicated advice and expert assistance from Personal Capital

What is wealth management?

Simply put, wealth management is the most comprehensive form of financial advice and portfolio management. More than just investment advice, wealth management encompasses the majority of investment, financial, tax planning, wealth planning, charitable giving, stock options and estate planning decisions. . Wealth management is for high net worth individuals, although the exact amount of wealth appropriate for these services ranges from a minimum of $ 250,000 to $ 1 million.

Wealth management companies vary in their approaches, services and scope. The companies range from large multi-consultancy firms with in-house lawyers, accountants and portfolio managers to smaller stores that outsource some of their services.

How does wealth management work?

Wealth management strives to meet the individual financial and life planning needs of the client. With that goal in mind, the first step in the process is usually an interview with a wealth management advisor to discuss the client’s financial situation, goals, risk tolerance, and any other related matters.

From this meeting, which can also include a comprehensive questionnaire, the wealth manager develops a personal plan for the client, including ways to meet the client’s goals and manage their financial concerns.

Once the plan is created and discussed with the client, the advisor transfers the client’s assets to the company and begins the investment process. The advisor will generally check with the client according to a mutually agreed schedule. At these meetings, investments and targets will be reviewed and adjusted if necessary.

Qualifications and diplomas of wealth manager

References in wealth management are important. After all, you won’t go to a general practitioner for surgery, neither will a wealth management advisor. The alphabet soup of references can be confusing, so to cut it down, take a look at some of the most important and popular professional designations for a wealth manager:

  • Chartered Financial Analyst (CFA): This is perhaps the most rigorous degree and requires a degree in finance, accounting, economics, or business and four years of professional experience before passing three separate comprehensive exams.
  • Certified Financial Planner (CFP): This designation requires a combination of a bachelor’s degree and financial planning courses, passing a rigorous exam, and 6,000 hours of work experience related to financial planning.
  • Chartered Wealth Manager (CWM): Awarded by the Global Academy of Finance and Management, the CWM requires a combination of professional education, a bachelor’s and / or graduate degree, three years of professional experience and successful completion of a exam.

Ultimately, however, the more important title might be whether a potential candidate is a trustee. A fiduciary means that the asset manager must put the interests of his clients before that of his employer or that of his employer. Fortunately, wealth managers who work for Registered Investment Advisors (RIA) must be trustees and registered with the Securities and Exchange Commission (SEC). In addition, some titles, such as the CFP, require those who wear it to act as a fiduciary.

Related: Reach your financial goals with dedicated advice and expert assistance from Personal Capital

Wealth management fees

Wealth management fees can be confusing and excessive fees eat away at returns. Unscrupulous wealth managers can harm clients with hidden fees or by recommending high-fee products.

To avoid unpredictable costs, look for a wealth management company that encompasses financial, estate and investment management into a single annual fee based on assets under management (AUM) or performance, recommends James E. Demmert, Managing Partner at Main Street Research.

Most wealth managers structure the fee schedule based on the asset under management, with a sliding scale as the portfolio grows. An advisor can charge 1.25% for the first $ 500,000, reduce the fee to 1.0% for the next $ 1.5 million, and charge 0.75% for accounts valued between 2 and 5 millions of dollars.

In today’s market, it is less common to find a financial advisor for high net worth clients who works solely on commissions. But there may be additional commissions levied on specialty products like life insurance, annuities and private investments.

Additionally, almost all mutual funds and exchange traded funds (ETFs) have underlying management fees that go directly to the fund provider. These range from a minimum of 0.04% for a core Vanguard stock index fund like the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) to over 1% for an actively managed fund. It is important to keep in mind how your advisory fees add up to these fund fees; if you’re not careful, they could very easily exceed 2% of your portfolio’s value per year, which could hamper your long-term investment returns.

How to find a wealth manager

To find a wealth manager, start with recommendations from trusted lawyers, accountants, and personal contacts with similar needs. Speak with references to other veterinary candidates. Stephan Dunbar III, Managing Partner at Business Strategies Group, a division of EquitableAdvisors, recommends choosing a wealth management advisor with a graduate degree and the appropriate qualifications. It goes without saying that the potential candidate should offer access to other professionals that you may need, such as lawyers and accountants.

Once you have a shortlist of candidates, make sure your choices are fiduciary. Next, clarify what wealth management services you’re looking for, and then determine if applicants are offering them. Chemistry and accessibility are also important. Determine if you are comfortable with virtual contact or if you prefer in-person meetings.

Finally, understand the costs and offsets involved and make sure there are no conflicts of interest. This means that if the advisor receives additional compensation for selling you a high priced annuity and also charges a percentage of the management fee under management, you could look elsewhere.

Related: Reach your financial goals with dedicated advice and expert assistance from Personal Capital

Should you use a wealth manager?

Wondering if a wealth manager is worth it? If you fall into a higher net worth category, typically over $ 250,000, $ 500,000, or $ 1 million, you may want to consider hiring a wealth manager, depending on your financial management ability and the complexity of your financial situation.

Amy Braun-Bostich, private wealth advisor at Braun-Bostich and Associates in Canonsburg, Pa., Suggests that those seeking help with stock options, net unrealized appreciation, concentrated wealth and business owners would benefit from hiring a wealth manager. Seniors seeking advice on wealth planning, charitable giving and financial management may also consider wealth management services.


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