A:

Private wealth management is an investment advisory practice that incorporates financial planning, portfolio management and other aggregated financial services for individuals, as opposed to corporations, trusts, funds or other institutional investors. From the client's perspective, private wealth management is the practice of solving or enhancing his or her financial situation and achieving short-, medium- and long-term financial goals with the help of a financial adviser. From the financial adviser's perspective, private wealth management is the practice of delivering a full range of financial products and services to an affluent clientele, so that the clientele can achieve specific financial goals.

Who Needs Private Wealth Managers?

Many private individuals of means lack the time, effort or knowledge to manage their finances successfully. To make up for what may be lacking, they seek the consultation of wealth managers who specialize in managing the finances of private, often high-net-worth individuals (HNWI). HNWIs have unique financial situations that require greater diligence and a higher degree of active management. Further, HNWIs require a more holistic approach to investment management than many financial advisers are capable of providing. HNWIs can have issues with income taxes, estate planning, investment management and other legal issues that need more attention and specific expertise than traditional investment advisers are qualified to give.

Who are Private Wealth Managers?

Private wealth management services can be provided by banks and large brokerage houses, independent financial advisers or multi-licensed portfolio managers who focus on high-net-worth individuals, and family offices. (See "Top 3 Trends Affecting Private Wealth Management.")

Many private wealth management firms are smaller groups within larger financial institutions that are focused on providing personalized service to their clients. Their main objective is to manage and grow the assets of their clients to provide for future generations. These groups often have a variety of advisers and expertise that provide guidance across a wide spectrum of investments including cash, fixed-income, equities and alternative investments. They can create a portfolio of assets that meets the investor's risk tolerance while also offering the opportunity for growth.

Most private wealth management firms are fee-based. They charge their clients a percentage of the assets under management. HNWIs may believe that fee-based financial advisers have less conflicts of interest as opposed to traditional commission-based advisers. Commissioned advisers can push investors towards front-end and back-end load mutual funds that charge significant commissions (without offering any better performance than no-load funds in many cases).  

Some HNWIs may want to consider opening a family office. A family office provides a wider range of services tailored to meet the needs of HNWIs. From investment management to charitable giving advice, family offices offer a total financial solution to high net worth individuals. There are two types of family offices: A single-family office supports one affluent individual or family, while the more common multifamily office supports multiple families and individuals. Multifamily offices are more prevalent due to economies of scale that allow for cost sharing among the clientele.

Technological advances have allowed many larger financial adviser companies to provide services online at reduced costs. Despite the gravitation of many investors to these types of services, however, many HNWIs want a more personalized approach to their finances, even with the additional cost.

RELATED FAQS
  1. Investment Banking vs Private Equity

    Despite both shared similar characteristics, they are different in many ways. Check out how private equity and investment ... Read Answer >>
Related Articles
  1. Personal Finance

    Private banking versus wealth management

    Discover the various ways in which private banking and wealth management services coincide, as well as the significant differences between them.
  2. Tech

    What Wealth Managers Need to Survive the Future

    Here is some insight into why wealth managers should accelerate plans to adopt technology and be willing to partner with financial tech firms.
  3. Managing Wealth

    Top 3 Trends Affecting Private Wealth Management

    Don't miss out on high-net-worth clients because you aren't prepared for their service demands.
  4. Financial Advisor

    Chase vs. Wells Fargo: Which Is Best for High-Net-Worth Accounts? (JPM, WFC)

    Compare private banking services offered by Chase and Wells Fargo to high-net-worth individuals, and decide which bank provides a better deal based on unique needs.
  5. Managing Wealth

    How to Find the Best Wealth Manager

    Finally there exists a small number of financial advisors who can be considered modern wealth managers. Here's how to find them.
  6. Financial Advisor

    Career Advice: Investment Banking vs. Wealth Management

    Take a comparative look at two of the most popular career choices in the financial sector, wealth management and investment banking.
  7. Tech

    What Advisors Can Learn From Ultra-Wealthy Clients

    The demands of bellwether ultra-wealthy clients are changing; here's what to expect and how to adjust your practices.
  8. Personal Finance

    Private banker: Career path and qualifications

    Discover what kind of work private bankers do, and learn more about how you can develop the experience and qualifications required to work in the field.
  9. Financial Advisor

    The Pros & Cons of a Financial Advisor Career

    Discover what a career as a financial adviser entails, and learn what pros and cons an individual faces when embarking on a career in this field.
  10. Investing

    Private Wealth Shifting To Asia

    A look at the changing landscape of privately held wealth across the globe
RELATED TERMS
  1. Private Banking

    Private banking includes personalized financial and banking services ...
  2. Family Offices

    Family offices are private wealth management advisory firms that ...
  3. Wealth Psychologist

    A wealth psychologist is a mental health professional who specializes ...
  4. Investment Management

    Investment management is a generic term that most commonly refers ...
  5. Investment Manager

    An investment manager is a person or organization that makes ...
  6. Going Private

    Going private is a transaction or a series of transactions that ...
Hot Definitions
  1. Futures Contract

    An agreement to buy or sell the underlying commodity or asset at a specific price at a future date.
  2. Yield Curve

    A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
  3. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  4. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  5. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  6. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
Trading Center