What Is Wealth Management? A Guide to Growing and Protecting Your Assets

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Wealth management is a service typically offered by brokerage firms and independent financial advisors to help wealthy individuals put together the pieces of their financial life. It’s not for everyone, though, and it can come with high fees that won’t make sense for some individuals.

Defining Wealth Management

Wealth management is a comprehensive financial planning service that includes more than just managing your investments.

Wealth managers take a holistic approach to your finances, including:

• Investment planning
• Tax strategy
• Asset allocation
• Insurance coverage
• Cash flow management
• Estate planning
• And more

Wealth management is often aimed at affluent clients who need help managing their wealth. If you’ve amassed a large nest-egg or built up a large balance of assets and investments, a wealth manager can help you create a roadmap for your income, investments, taxes and even estate.

What Exactly Is Wealth Management?

Wealth management helps wealthy individuals and families manage large portfolios of investments, real estate, and other assets to optimize returns, balance risk, and achieve financial goals.

Here’s a breakdown of what’s included in most wealth management services:

Comprehensive Approach

Wealth management is more than just building a retirement portfolio. It includes all pieces of your financial life, from insurance and investments, to tax strategy and estate planning for your heirs. This approach is much broader than a standard financial advisor offers.

Client-Centric Philosophy

Wealth management is customized to your individual goals, risk tolerance and life stages. It’s not cookie-cutter financial planning, but tailored to your exact preferences.

Investment Management

Wealth management includes managing your investments, including portfolio construction, asset allocation, rebalancing and risk management. This is what you’d expect from a financial planner, but is just one piece of the puzzle here.

Financial Planning

Wealth management also helps you manage your daily money decisions, including budgeting, cash flow analysis, and goal setting — such as buying a home, investing for your child’s education, etc.

Retirement Planning

Wealth managers help you come up with a comprehensive retirement plan, including strategies for accumulating and decumulating wealth, pension advice, Social Security planning, withdrawal strategies and more.

Estate Planning

Wealth management includes estate planning tailored to your goals. This includes help with wills, trusts, charitable giving, legacy planning and more.

Tax Planning and Optimization

Wealth management also includes strategic tax planning to help minimize tax liabilities across income, investments, and estates. There are usually licensed tax professionals on staff with most wealth management firms that help with these services.

Insurance Services

Wealth management also helps you pick the right types of insurance and coverage across life, disability, long-term care and even health insurance to protect your assets.

Debt Management

You can also get help with managing and reducing your debts to save on interest and lower your overall financial risk.

Philanthropic Planning

For clients interested in charitable giving, wealth management may include a way to include philanthropy in your overall financial plan.

Who Needs Wealth Management?

High net-worth individuals may find the most value because of how complex managing millions of dollars is. When you have over $1 million in assets, you usually have more complex tax situations, more investments to manage, a need for sophisticated estate planning, a plan for business succession, integrated philanthropic goals, and a pathway for multi-generational wealth transfer.

With some financial firms, there are services advertised as “Private Wealth Management” — often aimed at ultra high-net worth clients and is highly customized by nature. These individuals usually have $30 million or more to manage and the most complex financial situations.

Anyone could benefit from wealth management, though, so if you’re looking for better, smarter and more efficient ways to manage your wealth and make sound investments.

Benefits of Wealth Management

Imagine working decades to build life-changing wealth — but having no idea how to manage it. This is where wealth management steps in to give you a roadmap for your money and clarity for your financial goals.

Here are a few benefits of wealth management:

• Helps you set and reach short-term and long-term objectives
• Give you access to specialized expertise in investments, tax laws, insurance and more
• Helps you save time by offloading complex financial tasks
• Give you peace of mind and confidence in your financial plan and future
• Can save tens of thousands of dollars by legally reducing your tax burden
• Includes risk management and asset protection through investment diversification, insurance, and legal structures
• Built-in estate planning, ensuring wealth is passed on according to wishes
• Expert help to help you avoid emotional investment decisions

Wealth Management vs. Other Financial Services

Investment management is a service that helps you create an investment portfolio, retirement plan, and investing strategy to help you grow wealth through investing. Most investment management services are financial planners that can help you with retirement accounts, investing in the stock market and choosing an asset allocation for your investments.

But while investment management focuses solely on investing — typically stocks, bonds and mutual funds — wealth management is far more encompassing in the services it offers. Wealth management firms will manage everything an investment management firm does, but also help with budgeting and cash flow, asset management, insurance, estate planning, tax planning and more.

Wealth management takes a holistic approach to your finances, and can dive deeper into each area of your money than a purely investment management firm. Wealth management firms focus on helping you implement each step of the plan, while investment management firms target solid investment returns.

In general, investment management is aimed at middle and upper-middle class investors looking to build a solid retirement. Wealth management and private wealth management are aimed at high net-worth individuals who want a more “white glove” approach to their finances.

How Much Does Wealth Management Cost? 

Typically, a fee-based wealth manager will charge between 1% and 2% of a client’s assets per year. However, some advisors may charge more or less, so it’s important to ask before you begin a relationship. 

Wealth Manager Cost: An Example

On a $1,000,000 account, annual fees may generally range between $10,000 to $20,000.

Wealth managers typically charge clients an annual fee equal to a certain percentage of their assets. But others charge a flat or hourly rate. Some wealth managers charge a flat rate regardless of your asset balances, such as $10,000 per year, while others charge an hourly rate, such as $200 per hour.

It’s always a good idea to ask for a detailed breakdown of any fees or costs involved with your wealth management plan, so you understand what you’re paying for.

Is Wealth Management Worth the Cost?

Whether or not you should pay for a wealth manager is a very personal choice.

Why Professional Expertise Matters

On the one hand, a wealth manager technically doesn’t do anything that you can’t do on your own. For example, it’s never been easier — or cheaper — to manage your investments online, and you can file your own taxes every year fairly easily by using tax software.

However, you may not have the skills and insight regarding investments, taxes, retirement planning, etc., that a professional wealth manager brings to the table. Put simply — you may not have the time to manage everything.

If your wealth manager can:

• Provide a higher return on your investments
• Save you money on your taxes
• Pick the right insurance for you
• Plan your estate so that your heirs get the most money possible

Then a wealth manager can prove far more valuable than the fees you pay out.

On the other hand, if you’re paying out tens of thousands of dollars per year and feel you aren’t getting sufficient value, it’s time to find another manager or handle things on your own.

Tips for Choosing a Wealth Manager

When choosing a wealth manager, it’s important to evaluate the firm’s investment track record, investing approach, fees and client reviews. Ideally, you’ll be able to sit down with several wealth management firms and ask them a few specific questions:

• Are you a fiduciary?
• What are your credentials and the credentials of your team?
• What experience do you have, and what do you specialize in?
• What are the fees and costs charged for your services?
• What is your investment approach?

Honestly, it’s best to get a referral from a trusted source that can vouch for the credibility and performance of a wealth management firm. Just make sure to get all the details before handing the keys to your financial future over.

Next Steps: Improving Your Finances With Wealth Management

Wealth management can help you put together a complete financial plan around your investments, business ventures, taxes, personal spending and more. If you’ve built significant wealth, working with a wealth manager can help protect your nest egg and get the most from your money.

But wealth management can be expensive, and it may not be worth the cost for some investors. It’s important to assess your own situation to determine if professional wealth management is right for you.

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