What is Wealth Management?

Wealth Management

Wealth management is a comprehensive approach to financial planning that encompasses a wide range of services tailored to meet the needs of high-net-worth individuals. It involves creating a diversified investment strategy to grow and protect wealth, planning for retirement, managing tax liabilities, estate planning, and sometimes even includes services related to charitable donations and legal advice. The goal of wealth management is to sustain and grow long-term wealth, aligning financial planning with personal objectives. It’s typically delivered by financial advisors or private bankers who have expertise in a variety of financial disciplines and work closely with clients to develop a personalized financial plan.

The Role of a Wealth Manager Explained

So, what do wealth managers actually do? They’re basically financial services gurus with proficiency in complex financial matters often faced by the super-rich, like how to minimize estate taxes. These professionals may partner with other financial experts — for instance, accountants or estate planning specialists — to provide comprehensive financial advice. Let’s say there’s a wealthy business owner who’s been married and divorced, owns multiple properties, and has a bunch of investments and accounts. They might need expert advice in legal matters, property taxes, and investments. Here’s where a wealth manager would craft a detailed financial plan considering all these factors, possibly in collaboration with outside experts.

How are Wealth Managers Compensated?

How do wealth managers get paid? It could depend on where they’re employed. Those working at larger firms may receive a salary and bonuses. However, if they’re employed with a private firm owned by an advisor, any advisory fees would typically go to that advisor. And speaking of money, wealth management services usually come with high account minimums. Fidelity’s private wealth management service requires at least $2 million invested through them and $10 million or more in total investable assets. Similar services are provided by Vanguard as well.

Some wealth managers receive commision from the products they sell their clients. For example, a wealth advisor could recommend to their client a fixed-indexed annuity that offers potential market-linked growth with downside protection. The annuity product is offered by an insurance company, and when the client purchases the annuity, the insurance company pays a commission to the wealth manager as a sales incentive.

Commission-based compensation structures for wealth managers have become less common in recent years. Many wealth managers now operate on a fee-based model, where they charge a percentage of assets under management (AUM) or a flat fee for their services. This approach is seen as more transparent and aligned with the client’s best interests, as it reduces the potential for conflicts of interest that could arise from commission-based compensation.

Investment Strategies in Wealth Management

Wealth managers will utilise a number of different investment strategies such as diversification, tax planning, estate planning, and retirement planning. Their clients might get access to a wider range of investments than those provided by regular financial advisors, like hedge funds and private equity offerings. A typical financial plan developed by a wealth manager will incorporate all aspects of the client’s life, including estate and tax planning, and not just their investments.

Credentials of a Wealth Manager

A wealth manager typically should have certain credentials and qualifications. The specific requirements can vary depending on the country, jurisdiction, and the employer’s preferences. Here are some common credentials and qualifications:

Education: A bachelor’s degree in finance, economics, business administration, or a related field is often a minimum requirement for entry into the wealth management profession. Some employers may prefer candidates with advanced degrees, such as a Master of Business Administration (MBA) or a Master’s in Finance.

Licenses: Wealth managers often need to obtain relevant licenses to legally provide financial advice and execute investment transactions. The most common license in the United States is the Series 7 license, administered by the Financial Industry Regulatory Authority (FINRA), which allows for the sale of securities. Additionally, obtaining other licenses like the Series 66 or Series 65 (which also requires the Series 7) may be necessary to provide investment advisory services.

Certifications: Earning professional certifications can enhance a wealth manager’s credibility and expertise. Some widely recognized certifications in the wealth management field include:

  • Certified Financial Planner (CFP): The CFP certification is a globally recognized standard for financial planning professionals. It covers various aspects of financial planning, including investment management, retirement planning, tax planning, and estate planning.
  • Chartered Financial Analyst (CFA): The CFA designation is highly regarded in the investment industry. It requires passing three levels of rigorous exams covering topics such as investment analysis, portfolio management, economics, and ethics.
  • Chartered Wealth Manager (CWM): The CWM certification focuses specifically on wealth management and covers topics like investment strategies, risk management, tax planning, and estate planning.
  • Certified Private Wealth Advisor (CPWA): The CPWA certification is designed for wealth managers who work with high-net-worth clients. It covers advanced topics such as behavioral finance, estate planning, tax strategies, and risk management.

Experience: Wealth management firms often seek candidates with relevant work experience in the financial services industry. This can include experience in areas such as financial planning, investment management, or advisory services.

Continuing Education: Wealth managers are expected to stay updated with the latest industry trends, regulations, and investment strategies. Participating in continuing education programs, workshops, and industry conferences helps wealth managers maintain their knowledge and skills.

You’ve probably heard the terms ‘financial advisor‘ and ‘wealth manager’ used interchangeably. ‘Financial advisor’ is a general term that includes various financial professionals and doesn’t require a specific certification in the US. A wealth manager, on the other hand, focuses on matters concerning ultra-wealthy individuals and usually offer more services than a regular financial advisor. A wealth manager is also not required to hold any specific certification in the US; anyone can use the title ‘wealth manager’, so it’s a good idea to thoroughly vet any financial advisor you use.

You can verify the credentials of financial advisors and wealth managers using the Financial Industry Regulatory Authority’s BrokerCheck tool.

Is Hiring a Wealth Manager Worth It?

You might wonder if hiring a wealth manager is worth it. Well, if you need help with your financial planning needs, such as managing the tax ramifications of business income or setting up a donor-advised fund for your charitable contributions, a wealth manager can be a great asset. Some financial advisors offer services similar to wealth managers, letting you choose and pay for services on an “a la carte” basis. If you need help with estate planning, tax advice, or investing advice, getting professional help now might save your assets later.

If you think that wealth-management minimums are a bit too steep, then you probably don’t need wealth management. While some financial advisors also focus on ultra-wealthy clients, there’s a rising number of financial advisors who work with both affluent and middle-income earners. Some of these advisors even operate online. They offer portfolio management and detailed financial planning, including access to a human financial advisor. Often, these services are delivered over the phone or via video conference. Depending on your needs, make sure to shop around to find the service that suits you best.


  • Clay Jennings

    Clay Jennings is a specialist writer in credit cards and travel rewards. He is fervently enthusiastic about leveraging credit card and loyalty rewards for global travel. Before joining Money Maver, Clay was the Director of Finance Editorial at a New York publishing firm. When Clay is not sharing his insights on MoneyMaver he is meticulously planning how to leverage his points and other travel rewards for his next global adventure with his family.

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