What is wealth management?

If you have a high net worth, it may be time to find a wealth manager

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Wealth management is the process of making strategic decisions about your finances, including investment planning, insurance planning, tax planning and estate planning. Wealth management is typically reserved for high net worth individuals who have over $1 million in investable assets and need more than just basic financial planning services.

Wealth management firms typically employ several experts in different fields of finance to provide a broader approach to financial decisions. This is a valuable service if you have complex finances and a lot of assets, as managing a large amount of money can get complicated.


Key insights

  • Wealth management is for high net worth individuals who want a comprehensive financial plan.
  • Wealth managers offer investment advice, tax planning, estate planning and more.
  • Wealth managers typically charge an assets under management (AUM) fee, calculated as a percentage of your overall assets.
  • Wealth managers are typically certified financial planners (CFPs) or chartered financial analysts (CFAs) or have other licenses and certifications.

Understanding wealth management

Wealth management is designed for high net worth individuals who want more than just investment advice.

Jorey Bernstein, a private wealth manager and owner of Bernstein Investment Consultants in California, said, “Wealth management encompasses financial planning, investment management, banking, tax planning and estate planning to grow an individual's net worth sustainably.”

The goal of hiring a wealth manager is to have a comprehensive financial plan to preserve and grow your wealth over time while also planning for your estate and controlling your taxes.

A traditional financial planner may focus only on your investment strategy and retirement plans, but a wealth manager can help you design a plan for your entire financial life (debt payoff, budgeting, retirement withdrawals, estate, college savings, inheritance and more).

» MORE: How much do I need to retire?

What services do wealth managers offer?

“Wealth managers craft comprehensive plans to build, manage, protect and transition wealth based on a client's unique objectives,” Bernstein said. “Their role goes beyond investment advice to cover many aspects of a client's financial life.”

Here are a few of the services you can expect from a wealth manager:

Financial planning

Wealth managers can handle traditional financial planning services, including investment planning, insurance planning, budgeting, debt management and college savings.

Investment management

Most wealth managers will manage your investments for you, understanding your risk tolerance, creating an asset allocation and handling the day-to-day investing activities. This can also include withdrawal strategies and executing trades on your behalf.

Banking services

Some wealth management firms may offer banking services and cash flow management to help wealthy clients simplify their financial lives. This may include handling bill pay and other cash flow services.

Estate planning

Wealth management firms often help with estate planning to help wealthy individuals handle money after their death. This may include creating a will or trust for heirs and other beneficiaries.

Tax planning

Taxes can be a large expense for high net worth individuals, so wealth management firms can help optimize tax planning for a client’s investments and other assets.

Philanthropic planning

Some wealth managers can help you with planning how to distribute your wealth for charitable giving and other philanthropic efforts.

Wealth management cost

Wealth management costs can vary, depending on the services provided and your overall net worth. Wealth managers typically charge an annual fee based on a percentage of the assets being managed. This is known as an assets under management (AUM) fee.

The industry standard for financial advisory fees is 1% of total assets annually. Wealth management firms may charge around this mark, but they may charge more for additional services, such as tax planning and filing or estate planning. In general, wealth management firms will charge less for clients with a much higher net worth.

It’s important to remember that wealth management is a detailed financial planning and advisory service that doesn’t typically make sense for individuals who don't have at least a few hundred thousand dollars in investable assets. And most wealth management firms require a high minimum balance to work with them.

How to choose a wealth manager

Choosing the right wealth manager or wealth management firm requires knowing the types of services you need and interviewing potential wealth managers to find one who is a good fit.

“When choosing a wealth manager, seek an ethical, experienced professional who prioritizes your interests,” Bernstein said. “When evaluating potential managers, consider fee structure, services provided, credentials, communication style and firm resources.”

It’s important to work only with licensed professionals who are fiduciaries. This ensures that the wealth manager has the needed qualifications to manage your money and will always put your best interest above their own.

There are several qualifications and licenses that help distinguish good wealth managers, including:

  • Certified financial planner (CFP)
  • Chartered financial analyst (CFA)
  • Certified private wealth advisor (CPWA)
  • Certified investment management analyst (CIMA)

In addition to licensing and certifications, here’s what you’ll want to research about a potential wealth manager:

  • References: The best way to find a wealth manager is through referral. If someone you trust can recommend a reputable wealth manager, they are likely more trustworthy than just finding someone through an internet search.
  • Legitimacy: You can look up any financial advisor who is licensed or certified by using tools like FINRA BrokerCheck or CFP.net’s Find a CFP® Professional. This ensures your wealth manager is compliant with current laws and regulations and does indeed hold the certifications they claim.
  • Investment style: It’s important to understand a wealth manager’s approach to investing to make sure you’re aligned.
  • Fees: Most wealth managers work on an AUM model, but they may also charge additional fees for various services. Know how your wealth manager gets paid, and make sure you agree to the fees being charged.
  • Services offered: Check that your wealth manager offers the services you need. Some wealth management firms offer a team of advisors to help with various aspects of your financial planning.

» MORE: How to choose a financial advisor

Alternatives to wealth management

Wealth management is ideal for high net worth individuals who want a comprehensive financial and life-planning service, but there are some simpler (and less expensive) alternatives to choose from.

  • Robo-advisor: Robo-advisors are automated investing platforms that offer financial planning and tax optimization services for a fraction of the cost of a financial planner. Some robo-advisor platforms even offer banking services and goal-setting features.
  • Financial advisor: If you don’t quite need a full wealth management plan, hiring a licensed financial advisor can be a great way to come up with an investment plan and get help with retirement. Financial advisors typically have lower minimums than wealth managers but may offer many of the same services.
  • Do-it-yourself investing: If you feel confident enough, you can create your own investment plan. You may choose to build a diversified portfolio of low-fee index funds and manage your own taxes and estate planning. This will save you money in fees, but it does require more time and knowledge than hiring a professional.

» MORE: What is a good investment?

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FAQ

Is wealth management the same as asset management?

Wealth management refers to a holistic financial planning approach, while asset management refers specifically to investment management to grow your wealth. Wealth managers typically provide more services (taxes, estate planning, etc.), while asset managers focus solely on investing.

When should you get a wealth manager?

You should consider getting a wealth manager when you have achieved a high net worth (at least $1 million in liquid investments) and want help with managing your investments, tax planning and estate.

How do wealth managers make money?

Wealth managers typically charge a percentage of your total investments, known as an assets under management (AUM) fee. This is an annual fee that usually equates to 1% to 2% of your total investments. Some wealth managers also receive a commission for selling certain financial products (such as mutual funds and insurance), so it’s important to ask your wealth manager how they make money.

Bottom line

Wealth management is a holistic approach to handling your overall financial picture. Hiring a wealth manager can help you plan for retirement, optimize your taxes, protect your assets and make sure your heirs are taken care of.

If you have a high net worth and want a comprehensive financial plan and money management strategy, finding a good wealth manager can be a great idea. But if you don’t need a ton of services or are still growing your net worth, there are alternatives to consider, such as robo-advisors or financial advisors.


Article sources

ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

  1. FINRA, "Professional Designations." Accessed Nov. 18, 2023.
  2. FINRA, "BrokerCheck." Accessed Nov. 18, 2023.
  3. Certified Financial Planner Board of Standards, "Verify a CFP Professional." Accessed Nov. 18, 2023.
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