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Wealth management is a comprehensive service aimed at providing a holistic view of a client’s financial picture, including services such as investment management, financial planning, tax planning and estate planning.
Asset management is generally considered a ‘high-end’ type of service, and some asset managers may require a certain level of investment assets or a minimum net worth. For clients who need this level of service, it can be helpful to consolidate all types of financial advice in one place with just one company.
Key Asset Management Objectives
The objectives of asset management vary depending on the investor. Every client’s needs and situation are different, and good wealth advisors will tailor their advice accordingly.
Some key asset management objectives for clients include:
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Setting financial goals and designing strategies to achieve those goals
- Helping clients preserve and maximize their wealth
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Managing their investments and finances
- Reducing the tax impact of wealth accumulation
- Drawing up strategies for passing on their assets, also known as estate planning
What is asset management?
Wealth management is a holistic service focused on helping mid- to high-net-worth clients grow their money, manage their liability exposure, and devise strategies to pass on their wealth to their designated heirs. Wealth management services take a comprehensive approach to the financial situation of wealthy clients, rather than working with an advisor who focuses solely on financial planning or investment management.
Some typical services offered by asset managers include:
- Investment management and advice
- Extensive financial planning
- Tax planning and accounting services
- Real estate planning
- Philanthropic planning
- Legal services
- Retirement planning
However, some of these services may be offered in collaboration with an external partner. Legal services are a good example of this.
How much money is needed for asset management?
There are no hard and fast rules about how much an investor needs to obtain wealth management services. Any minimums in terms of investable assets, net worth or other metrics will be set by individual asset managers and their companies.
That said, a minimum of $2 million to $5 million in assets is the range within which it makes sense to consider the services of a wealth manager. Much below that and it can be difficult to justify the cost of these types of services.
Again, these minimum levels will vary by company. They may also vary slightly depending on your circumstances. For example, an asset manager may want to acquire the children of some of his current larger clients to ensure that the wealth they inherit remains with his company. They may also want to build solid relationships with younger professionals, such as doctors or lawyers, to maintain their businesses once they start earning much higher incomes.
How to choose a wealth manager
When choosing a wealth manager to work with, you need to look at several things.
First, does the wealth management company work with clients like you? Some asset managers may focus on a specific type of client, such as doctors or lawyers. If your situation does not suit that type of client, then that specific asset manager may not be right for you.
Second, you’ll want to look at the manager’s qualifications. Here are some questions to consider when selecting a wealth manager:
- What professional designations do they have? Examples include CFP (Certified Financial Planner), CPA (Certified Public Accountant), CFA (Chartered Financial Analyst).
- What is their level of experience in asset management?
- What services does the company offer?
- How often do you expect to communicate with them?
- What types of fees do they charge?
- Are they independent or part of a larger company?
This table summarizes the fundamental differences between asset managers, portfolio managers and financial advisors.
| ASSET MANAGER | PORTFOLIO MANAGER | FINANCIAL ADVISOR |
|---|---|---|
| An asset manager provides comprehensive, holistic advice in a wide range of financial and related areas. These include: Investments Tax and accounting services Estate planning Retirement planning Comprehensive financial planning Legal and estate planning Philanthropy | A portfolio manager focuses on asset management and generally does not provide advice or services in other areas. This professional focuses on: Selecting investments Portfolio management Tax loss harvesting Cash management |
Financial advisor is a term that can encompass a number of services. Financial advisors often provide advice on investments, financial planning, retirement planning and other related areas. This professional focuses on: Financial planning Basic retirement planning Tax planning Investments |
Asset management strategies
Wealth management strategies will vary based on the client’s specific needs. Overall, the reason to hire an asset management firm is to look for strategies to preserve and grow your overall wealth. This can mean different things to different people. For example, some individuals are more focused on preserving their wealth than growing it, so the wealth manager would design safer strategies aimed at that goal.
In general, wealth management involves coordinating all the moving parts of a client’s financial situation into a comprehensive wealth plan. Consider the customer’s tax situation, investments and pension planning.
Examples of asset management strategies include:
- Developing a comprehensive investment strategy that includes all of the client’s different types of investment and retirement accounts.
- Coordinating an optimal tax planning strategy in their estate planning.
- Ensuring that client estate plans reflect their wishes.
- Drawing up a succession plan for entrepreneurs.
How do you find an asset manager?
Once you’ve determined that you need a wealth manager to help you navigate your financial needs, you should find a number of companies to talk to before deciding which one to hire. Finding an asset manager can be quite a task. In some areas there may be dozens of businesses to choose from and narrowing down the list can be difficult, while in other areas there may be no businesses nearby.
Here are some tips for finding a wealth manager near you:
- Contact friends and family to see if they use a wealth manager and can recommend one to you. They can also give an honest assessment of the services provided by their office.
- Financial publications sometimes offer annual lists of the best asset management firms in a particular field. Consider checking these sites to find a highly rated wealth manager in your area.
- Bankrate’s financial advisor matching tool can also help you identify advisors who may be able to provide wealth management services.
Asset management alternatives
If the fees or minimum assets required by most asset managers seem too high for you, your situation is probably not suitable for a wealth manager. However, there are also other options for getting financial advice:
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Empower is an online advisory and asset management company that offers a number of services with lower minimum fees and fees than a traditional asset management company.
- Vanguard Personal Advisor Services is a service offered by Vanguard that provides advice and planning to clients.
There are a number of other online financial advice services and apps that offer a range of services from very basic financial advice to some aspects of what would be considered wealth management. Robo-advisors have grown in popularity in recent years and can offer a cheaper alternative if you’re not yet in a place financially where the service of a traditional wealth management firm is feasible for you.
Frequently Asked Questions
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Wealth managers provide holistic financial advice to help their clients grow and protect their assets. This advice goes further than just providing advice about a customer’s investments or drawing up a financial plan for the customer. Wealth managers generally work with clients with higher net worth than a financial planner. They often work with professionals in related fields, such as tax professionals and attorneys, to help design a comprehensive estate planning strategy for their clients.
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Asset managers can be paid in different ways. Two common compensation methods are a lump sum arrangement or compensation based on a percentage of the client’s assets under management.
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Financial planner is a term that can mean many things. Financial planners usually only focus on doing financial planning for their clients. Asset managers offer comprehensive, interdisciplinary services to their typically wealthy clients. In most cases, financial planning is only a first step. Wealth managers integrate this with tax planning, investment advice, estate planning and other services to help clients achieve their goals.
In short
Wealth management is about securing your future, achieving your goals and preserving your legacy. Many people don’t have the capital necessary to meet with a wealth manager, but for those who do, this service can provide a host of long-term benefits.
