What Is Wealth Management?

Wealth manager meeting her client in her office

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Wealth management is a 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.

Wealth management is a 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 you need to know about wealth management, including how it works and how it compares to asset management.

What Is Wealth Management?

People who have a high net worth may need more services than those offered by traditional financial advisors. Those with millions—perhaps even billions of dollars—may have complex portfolios, complicated tax situations, and other needs that are unlikely to apply to average investors.

Wealth managers often have access to a wider range of financial products and services. Although clients pay a fee, they receive strategies designed with their finances in mind.

Services offered by wealth managers may include:

  • Investment management and advice, including retirement planning
  • Legal and estate planning
  • Accounting and tax services
  • Review 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 grow your money over time.

A financial advisor may be able to help you build your wealth. On the other hand, 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. You can 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 good 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 fees add up.

Wealth Manager Qualifications

There are no set requirements to become a wealth manager. But, there are backgrounds you're likely to find among wealth managers.

Most wealth managers are likely to have a college degree, often in a field such as finance or accounting. Many may even have master’s degrees, law degrees, or other 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. Shop around and find one who best suits your needs. 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 clients.

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 like asset management in many ways. But, wealth management is 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. This ensures that company assets are being used in the most efficient way possible.

Key Takeaways

  • Wealth management is a kind of financial advisory service that's only offered to those with high net worths.
  • Millionaires and billionaires are the most likely to need the services of a wealth manager.
  • Wealth management can help you make choices 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.

Article Sources

  1. Financial Industry Regulatory Authority. "Series 7 – General Securities Representative Exam." Accessed June 24, 2021.