What Is Wealth Management? Do You Need It? (2024)

Your wealth—as measured by both possessions and money—should be managed in order to grow or to avoid losing value. Wealth management is the process of reviewing and making decisions about your wealth so you can achieve your financial goals.

A wealth manager may come with any number of certifications, but in general, this person is a professional who provides financial advice and services to help you with your wealth management journey. Services within the field of wealth management may include investment, retirement, tax or estate planning.

Here’s what you need to know about wealth management before deciding if you need a wealth manager, or to help with choosing a firm.

What Is Wealth Management?

Wealth management is the process of making decisions about your assets, sometimes with a wealth manager. This includes, but isn’t limited to, financial investments, tax planning, estate planning and other financial matters.

The goal of wealth management is to help you achieve financial security and grow and protect your wealth.

A wealth manager is a certified professional who provides financial advice and services to clients who need wealth management help. They are a licensed financial professional who typically provides a comprehensive range of services. These may include investment management, financial planning, insurance sales, tax advice and estate planning.

The goal of a wealth manager is to help clients grow and preserve their wealth over the long term.

What Do Private Wealth Managers Do?

Private wealth managers offer the same types of services as other wealth management firms. However, they usually provide these services for high-net-worth individuals (HNWIs) or accredited investors with assets in the millions.

These are some of the services most commonly available through wealth management firms:

• Investment management. A wealth manager will work with you to develop an investment strategy tailored to your goals and risk tolerance. If the manager is a licensed investment advisor, they may also select and manage investments on your behalf, often in exchange for an annual fee.
• Financial planning. A wealth manager can help you develop a financial plan that includes saving, investing and spending goals. The manager can also help you plan for retirement, saving for college and other major life events. These plans can be revisited periodically as your circ*mstances change.
• Tax advice. A wealth manager can provide advice on how to structure your finances in a way that minimizes your tax liability. This is especially important if you own your own business or have multiple income streams.
• Estate planning. A wealth manager can help you develop a plan for what will happen to your assets after your death. This may include creating a will or trust and designated beneficiaries.

How Much Money Do I Need To Hire a Wealth Manager?

Although financial planning services are something almost anybody can benefit from, more complex wealth management services aren’t usually required until individuals reach a certain net worth.

Different wealth management firms will usually charge different amounts of fees. They may also require different minimum levels of assets to assume management over them.

Although there is no hard and fast rule for when somebody should seek wealth management, it’s usually assumed you don’t need wealth management until you have at least a few hundred thousand dollars in assets.

Should I Hire a Wealth Manager?

The decision to use a wealth manager depends on your financial situation and goals, as well as your financial expertise. If you’re clear about your goals and confident in your ability to choose the products and strategies that will help you grow and protect your wealth, you may not need the help of a wealth manager.

However, if you run into questions you can’t answer, or have needs that could benefit from input from a specialist, then a wealth manager could help you make informed decisions about your finances and provide guidance throughout the process.

Other advisors you work with on a regular basis—like your accountant or attorney—may also be able to provide insight into whether a wealth manager can help with your financial needs.

How To Choose a Wealth Manager

When choosing a wealth manager, it’s important to find a professional who is reputable and has the right licenses and expertise to give you sound guidance for your unique needs. For example, some certifications you might look for include certified investment management analyst (CIMA), certified private wealth advisor (CPWA) and certified financial planner (CFP), among others.

Here are some factors to consider when interviewing wealth managers:

• Reputation. Ask around for reviews on local firms, or search for an advisor through FINRA Brokercheck or the SEC’s Investment Advisor Public Disclosure database to learn about the reputation of different firms.
• Clients. Make sure the advisor has a history of working with clients in circ*mstances similar to your own.
• Investment philosophy. The advisor you work with is going to suggest or choose strategies for your portfolio, so you’ll want to agree with the way they make decisions.
• Offerings. Confirm they offer the specific products or services that you need, and ask whether those products are proprietary or non-proprietary.
• Fees. You may be charged investment-related or specific advisory fees. Make sure you understand what these are, and what products or services they’re tied to.

Before signing with an advisor, make sure they’re someone you’re comfortable working with and someone you have confidence in. This person will be responsible for making decisions about your finances, so it’s important that you trust them. Meet with a few different wealth managers to get a better sense of who is a good fit for you.

Wealth Management Strategies

Strategies used by wealth managers vary across the industry. On the investment side, some of the most common strategies include:

• Asset allocation. The process of dividing an investment portfolio among different asset categories, like stocks and bonds.
• Diversification. A risk management technique that involves investing in a variety of assets to minimize the impact of losses in any one particular asset.
• Rebalancing. The process of realigning a portfolio’s assets to maintain the original risk/reward ratio when things shift.
• Tax-loss harvesting. A strategy used to minimize capital gains taxes by selling securities that have experienced losses and replacing them with similar investments.

These are just a few of the strategies that wealth managers may use to help you reach your investing goals. The specific strategies employed will depend on your unique situation.

Alternatives to Wealth Management

If you are comfortable managing your own finances, a wealth manager isn’t a must. Or, if you think you could use a little help but can’t find a manager you’re comfortable with or prefer not to involve another person in your finances, there are other options.

One way to manage your money according to a defined investment strategy—without relying on a wealth manager—is to use a robo-advisor. A robo-advisor is an automated trading system that has an investment strategy defined by a wealth management firm, and it periodically buys or sells securities automatically based on its specific strategy.

Robo-advisors can be a good option for people who want to manage their own finances but don’t have the time or knowledge to do so effectively.

Another option is to invest in index funds. Index funds are a type of publicly-available investment that track specific market indexes, like the S&P 500. Index funds are a simple and low-cost way to invest, typically with diversification across a cross-section of the stock market.

Managing your wealth is important, so whatever method of wealth management you decide to go with should be based on your individual needs and goals.

Frequently Asked Questions