What Is Wealth Management?

It’s more than just financial planning.

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Many people with a high net worth have liquid assets that exceed a certain amount, often six or seven figures. If their net worth is $1 million or higher, then they’re also seen as an accredited investor in the eyes of the SEC. If you fit into this category, you may need more than a traditional financial advisor when it comes to managing your money. Wealth management may be able to give your accounts the attention and expertise they need. Here’s what to know about wealth management, who it benefits and how, plus qualifications for becoming a wealth manager.

Wealth Management Explained

The idea behind wealth management is that people who have a high or ultra-high net worth may often require services beyond those offered by traditional financial advisors. Those with hundreds of thousands, millions, or even billions of dollars may have large and complex investment portfolios, complicated tax situations, various businesses and ownership interests, or other specific needs.

Wealth managers may be able to leverage a wide range of financial products and services to address a specific set of requirements, often delivering customized strategies for each client for a fee.

Services offered by wealth managers may include, but are not limited to:

  • Investment management and advice, including retirement planning
  • Legal and estate planning
  • Accounting and tax services
  • Examination of health care and social security benefits
  • Charitable giving plans
  • Help with starting or selling a business

If you don’t have a high net worth or a lot of money saved, you likely don’t need a wealth manager. You may instead prefer to pay for a financial or investment advisor who can help you create a strategy to accumulate money over time. Think of it this way: A financial advisor may be able to help you grow your wealth, while a wealth manager can help you manage your money once you’ve achieved a high net worth.

How Wealth Managers Make Money

Like most financial advisors, wealth managers earn their income by taking a percentage of the assets they manage. These fees can vary between firms—and even across different types of accounts within the same firm—but they generally average around 1%. However, wealth managers will often charge less for people with higher assets.

Wealth managers will often compete for “big fish” clients with millions or even billions of dollars to manage. The more assets under management, the more fees they pull in.

According to the Bureau of Labor Statistics, the average median salary for a personal financial advisor in 2018 was $88,890 per year. Given that wealth managers offer more services and work with clients that have higher net worths, their earning power is likely higher. Consider that if a wealth manager were to charge a fee of just 0.50% to a client with $10 million in their portfolio, they’d be able to earn $50,000 in commission for that one client. And if they had multiple high-net-worth clients, their annual earnings could easily reach six figures.

Small and Big Wealth Managers 

If you are in need of a wealth manager, there are many options depending on your needs and preferences. Many people choose to work with a private wealth manager who can offer highly personalized services. Others may choose to work with the wealth management divisions of large financial institutions. Most big banks have wealth management divisions.

For instance, Bank of America’s Global Wealth and Investment Management division brought in $4.8 billion in revenue and more than $1 billion in net income during the first quarter of 2019. The total balance of its wealth management clients was $2.8 trillion during the quarter. 

Other major wealth managers include UBS, Royal Bank of Canada, Credit Suisse, Morgan Stanley, and Wells Fargo. A 2018 survey from Scorpio Partnership showed that the top 25 wealth management firms managed a combined $16.2 trillion in 2017. 

Wealth Manager Qualifications

There is no official standard of qualifications to become a wealth manager. However, there are certain requirements that must be met in order to carry out certain aspects of the job.

Though not necessarily a requirement, most wealth managers are likely to have a college degree, often in a field of study such as finance, accounting, mathematics, or economics. 

Wealth managers are often expected to execute the buying and selling of stocks, bonds, and other investments. Because of this, they are usually required to pass the Series 7 exam administered by the Financial Industry Regulatory Authority (FINRA).

Many wealth managers may even have master’s degrees, law degrees, or other related certifications. It may be wise for them to also study to become Certified Financial Planners (CFP) and Certified Private Wealth Advisor (CPWA).

The Bottom Line

People with millions or even billions of dollars in assets may need the services of a wealth manager. A wealth manager works with people of high or ultra-high net worth who may be seeking personalized advice and services that address all aspects of their financial situation. Wealth managers can help with investing, retirement and estate planning, taxes, accounting, and much more. They usually make money by charging a commission based on a percentage of the assets they manage, potentially resulting in a hefty income for themselves and/or the companies they work for. 

Article Sources

  1. Bureau of Labor Statistics. "Occupational Outlook Handbook: Personal Financial Advisors," Accessed Oct. 4, 2019.

  2. Bank of America. "Bank of America Reports Record Quarterly Earnings of $7.3 Billion, EPS $0.70," Accessed Oct. 4, 2019.

  3. Scorpio Partnership. "Press Release: Scorpio Partnership 2018 Global Private Banking Benchmark," Accessed Oct. 4, 2019.