What Is Wealth Management?

Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients. Using a consultative process, the advisor gleans information about the client's wants and specific situation, and then tailors a personalized strategy that uses a range of financial products and services.

A wealth management advisor or wealth manager is a type of financial advisor who takes a broad view of available financial disciplines and services, such as financial and investment advice, legal or estate planning, accounting, and tax services, and retirement planning, to manage an affluent client's wealth for one set fee. Different advisors have different methods for structuring their fees. Clients who require comprehensive wealth management services and hope to establish a long-term relationship with a financial advisor often work under a fee-only or an assets under management (AUM) arrangement with their advisor.

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Wealth Management

Understanding Wealth Management

Wealth management is more than just investment advice: It can encompass all parts of a person's financial life. Instead of attempting to integrate pieces of advice and various products from multiple professionals, high net worth individuals are more likely to benefit from a holistic approach. In this method, a single manager coordinates all services needed to manage their money and plan for their own or their family's current and future needs.

Many wealth managers can provide services in any aspect of the financial field, but some choose to specialize in particular areas. This may be based on the expertise of a specific wealth manager, or the primary focus of the business within which the wealth manager operates.

In certain instances, a wealth management advisor may have to coordinate input from outside financial experts as well as the client's own service professionals (for example, an attorney or accountant) to craft the optimal strategy to benefit the client. Some wealth managers also provide banking services or advice on philanthropic activities.

A wealth management advisor needs affluent individuals, but not all affluent individuals need a wealth management advisor. This service is usually appropriate for wealthy individuals with a broad array of diverse needs.

Key Takeaways

  • Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients.
  • A wealth management advisor is a high-level professional who manages an affluent client's wealth holistically for one set fee.
  • This service is usually appropriate for wealthy individuals with a broad array of diverse needs.

Wealth Management Example

Those wealth management advisors in the direct employ of an investment firm may have more knowledge in the area of market strategy, while those who work for a large bank may focus on the management of trusts and available credit options, overall estate planning or insurance options. The position is considered consultative in nature, as the primary focus is providing needed guidance to those using the wealth management service.

Wealth Management Business Structures

Wealth managers may work as part of a small-scale business or as part of a larger firm, one generally associated with the finance industry. Depending on the business, wealth managers may function under different titles, including financial consultant or financial adviser. A client may receive services from a single designated wealth manager or may have access to members of a specified wealth management team.

Fees for a Wealth Manager

Advisors can charge for their services in several ways. Some work as fee-only advisors and charge an annual, hourly, or flat fee. Some work on commission and are paid through the investments they sell. Fee-based advisors earn a combination of a fee plus commissions on investment products sold.

A survey of nearly 1,000 advisers finds the median advisory fee up to $1 million of assets under management is 1%. However, many advisors charge more, especially on smaller account balances. Individuals with larger balances can often pay substantially less, with the median AUM fee in fact declining as assets increase.

Credentials for Wealth Managers

You should check the credentials of a professional to see which designation and training might best suit your needs and situation. The top three professional advisor credentials are Certified Financial Planner, Chartered Financial Analyst, and Personal Financial Specialist. Many websites for professional certifying organizations allow you to vet if a member is in good standing or has had disciplinary actions or complaints.

FINRA, the financial industry regulator, has a tool that explains professional designations. You can also see whether the issuing organization requires continuing education, takes complaints or has a way for you to confirm who holds the credentials.

Strategies of a Wealth Manager

The wealth manager starts by developing a plan that will maintain and increase a client's wealth based on that individual's financial situation, goals and comfort level with risk. After the original plan is developed, the manager meets regularly with clients to update goals, review, and rebalance the financial portfolio, and investigate whether additional services are needed, with the ultimate goal being to remain in the client’s service throughout their lifetime.