Wealth management is a special kind of financial advisory service for accredited investors and other people with high net worths. Wealth managers provide advice about investing, estate planning, taxes, and anything else that could help grow a client's wealth.
Here’s what to know about wealth management, including whom it's designed for and how it compares to asset management.
What Is Wealth Management?
The premise of wealth management is that people who have a high net worth may require more extensive services than those offered by traditional financial advisors. Those with millions—perhaps even billions of dollars—may have complex investment portfolios, complicated tax situations, various businesses, ownership interests, and other specific needs that are unlikely to apply to average investors.
Wealth managers may be able to leverage a wide range of financial products and services to address a specific set of requirements. Although clients pay a special wealth management fee, they receive customized strategies designed specifically with their finances in mind.
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, 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.
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 already achieved a high net worth.
How Does Wealth Management Work?
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. In general, you could expect to see fees start around 1% of assets under management.
Wealth managers will often compete for “big fish” clients with the highest net worths. As a result, they may charge a lower percentage fee if you have a higher net worth. The more assets under management, the more fees they pull in—even if they're charging a lower fee in terms of percentage.
For financial advisors, breaking into wealth management is a lucrative career move. 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 would earn $50,000 in commissions that year from that one client. The more clients a wealth advisor has, the more those commissions add up.
Wealth Manager Qualifications
There is no official standard of qualifications to become a wealth manager. However, there are educational and career backgrounds you're likely to find among wealth managers.
Although not necessarily a requirement, most wealth managers are likely to have a college degree, often in a field such as finance, accounting, mathematics, or economics. Many wealth managers may even have master’s degrees, law degrees, or other related certifications. It may also be wise for them to become a Certified Financial Planner (CFP) and a Certified Private Wealth Advisor (CPWA).
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).
How To Find Wealth Managers
If you need a wealth manager, there are many options, so shop around and find one who best suits 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. These services are less personalized, but they can leverage greater amounts of capital by pooling the resources of many wealthy individuals.
Most big banks have wealth management divisions.
Wealth Management vs. Asset Management
|Wealth Management||Asset Management|
|More broadly focused than asset management||More narrowly focused than wealth management|
|Concerns assets, taxes, trusts, and more||Concerns assets such as stocks, bonds, real estate, and cash|
|Is for individuals or families||Can apply to individuals, businesses, or any other entity|
|Reserved exclusively for those with high net worths||Is available in some form for everyone|
Wealth management is similar to asset management, but wealth management is generally a much broader practice. The difference is clear when you think about the two terms. "Asset management" concerns assets, including cash, stocks, bonds, and real estate. "Wealth management" concerns all aspects of wealth, including tax issues, business ownership, and legacy issues that will affect your family for generations.
Asset management is also more widely available. Wealth management is reserved for those with high net worths. Asset management, on the other hand, can be used by anyone. Even businesses can make use of asset management—ensuring that company assets are being used in the most efficient way possible.
- Wealth management is a special kind of financial advisory service that's only offered to individuals with high net worths.
- Millionaires and billionaires are the most likely to need the services of a wealth manager.
- Wealth management can help individuals make decisions related to investing, retirement and estate planning, taxes, accounting, and much more.
- Wealth managers usually earn money by charging a commission based on a percentage of the assets they manage.