What Does A Wealth Manager Do?

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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.

But what exactly do they do with your money, and are they worth it? Here’s how wealth managers operate, the services they offer and some strategies they employ to help you preserve and grow your wealth over time.

What Exactly Does a Wealth Manager Do?

Wealth managers provide holistic financial planning for high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients to accumulate, preserve and transfer wealth. This means wealth managers do far more than just manage investments.

Wealth managers focus on helping wealthy individuals and families put together a complete, lifelong financial plan. This includes:

• Investing
• Insurance
• Taxes
• Cash flow planning
• Estate planning
• And more

This is a more full-service approach than traditional financial planners, and usually wealth managers have a team of licensed experts to help with various aspects of the financial plan.

What Services Does a Wealth Manager Offer?

Wealth managers are a one-stop-shop for wealthy individuals with millions of dollars to care for. This means your assets and investments need a plan to not only grow it but also eventually pass onto heirs.

Here are the services offered by most wealth management firms:

Investment Management

Like most financial planners, wealth managers can manage client investments directly. Most wealth management firms employ licensed financial planners like CFPs that can model portfolios, retirement scenarios and invest client money in the market.

Tax Planning

Taxes have a huge impact on wealth, especially if you’ve accumulated a lot. Wealth managers employ CPAs and other tax professionals to help with strategic tax planning. This includes tax-advantaged investment accounts, Roth conversions, tax-smart philanthropy, business income tax strategy and more.

Estate Planning

Wealth managers help you map out your giving and estate plan details to ensure your money goes where you want it to go after you pass away. This includes setting up trusts, living wills and more.

Retirement Planning

Wealth managers help you map out a retirement plan, including tax-smart investing strategies — and conversions, how much you need to retire, which accounts to withdraw from first and how much you can live on per year.

Risk Management

Wealth managers help you protect the wealth you built by advising on the types of insurance you need, the types of investments that help you earn money without much downside risk and how to approach strategic private investment opportunities.

Debt/Cash Flow Analysis

Wealth managers can help you put together a plan for managing outstanding debts, and also give you a cash flow analysis to help you stick to some spending guidelines throughout the month.

Professional Coordination

If a wealth manager can’t handle a specific money task, they will coordinate with professionals who can. This could include tax attorneys, insurance agents and other professionals. 

Wealth Management Strategies

Wealth managers employ a few money management and investing strategies to help you build and preserve wealth. They do this by developing customized strategies based on client goals, risk tolerance and timeline needed to reach goals.

Here’s how those strategies are used in the planning and execution process of working with a wealth manager:

Accumulate and Preserve Wealth

Wealth managers work with you to build net worth and investment portfolio goals. They will collect information like:

• Your income
• Your debt balances
• Your current net worth
• Your asset balances, such as investments, real estate, etc.
• Your financial goals, such as net worth, etc.
• Your risk tolerance

With this information, they can map out several scenarios for how to build wealth. This may include investing more in tax-advantaged accounts, investing in alternative assets, optimizing business structure, paying off high-interest debt or simply saving more cash.

Wealth managers will also create an investment plan based on how much risk you’re comfortable with. Plus they can advise on the types and levels of insurance you should get to help protect your assets and preserve your wealth.

Minimize Tax Burdens

Good wealth managers will have in-house tax professionals and financial planners that understand long-term tax strategy. These experts can use the tax code to your advantage — helping you set up tax-advantaged accounts, creating trusts, strategically allocating investments, and finding ways to minimize the taxes you owe.

If a wealth manager doesn’t have an in-house tax professional, they will arrange a consultation with a CPA, Enrolled Agent (EA) or other tax professional to come up with a tax strategy for your money.

Generational Wealth Transfer

Wealth managers deal with high net worth and ultra high net worth individuals, and estate planning is a key piece of the overall financial plan. From account structure, to setting up trusts and living wills, to estate tax planning, to detailing out what happens to your money after you’re gone — wealth managers cover every base.

Wealth managers may bring in estate attorneys to help you structure your estate legal estate to protect your assets and your heirs.

Benefits of Hiring a Wealth Manager

Wealth managers help you make the most of your money, whether you’re still accumulating or whether you’re just trying to manage the wealth you’ve built over decades. Wealth management is a much more comprehensive approach than traditional financial planning, and touches on every part of your financial life.

Wealth managers offer a holistic approach, expert guidance, time savings, peace of mind, tax optimization and objective advice to maximize your money.

Is a Wealth Manager Right for You?

Wealth managers are not for everyone, but can help high net worth individuals create a complete plan for their money. Wealth managers typically require minimum account sizes that can range from $500,000 to $5 million or more.

Wealth managers are also ideal for clients with more complex needs. If you just need a simple retirement plan, you might do fine with a financial advisor. But if you have vast wealth, multiple businesses or income sources, private investments, and a more complex tax situation, wealth management might fit the bill.

Wealth Manager vs. Financial Advisor

A wealth manager tends to take a hands-on approach with clients as they provide ongoing financial advice and management. Here are some key takeaways from common duties:

• Curate communication with a client’s attorneys and accountants
• Focus on building and maintaining wealth through investment management and portfolio management
• You might meet with a wealth manager several times a year to review how you’re progressing toward your goals, whether it’s keeping your stock portfolio well-balanced or looking for new business opportunities

With financial planners, you might have an initial meeting and a couple of follow-up meetings but they serve in a more advisory service capacity as opposed to direct involvement. Here are some things to consider:

• A financial planner will typically work with a wider range of clients 
• Though these planners provide advice, the client is expected to put that advice into action.
• Meetings may include discussing reducing debt, retirement planning or building an emergency fund.

Cost

Different wealth managers have different fee structures and these costs should be factored in. Some charge an hourly fee, some charge an annual fee, some charge a percentage of the assets they’re managing, and some charge a combination of all three.

Wealth managers who charge a percentage of assets under management often use a tiered structure for fees.

Tiered Fee Structure Example

Wealth managers often charge fees based on a percentage of assets under management, using a tiered structure.

For example:

• 1% for the first $1 million under management.
• 0.75% for the next $1 million.
• 0.50% for anything above $2 million.

How it works in practice:

• If you had $3 million in assets under management with this fee structure:
  • You would pay $10,000 in fees for the first $1 million — 1% of $1 million.
  • You would pay $7,500 in fees for the second $1 million — 0.75% of $1 million.
    • You would pay $5,000 in fees for the third $1 million — 0.50% of $1 million.
• Total annual fees: Adding these together, your total annual fees would be $22,500.

Keep in Mind

Legitimate wealth managers are fiduciaries — meaning they must make financial decisions in your best interest. This also means they can’t accept compensation for recommending financial products to you. If you find a “wealth manager” who gets a commission for recommending a fund, insurance policy, or other product, they are not a true fiduciary. 

Finding the Right Wealth Manager

Choosing a wealth manager requires research and due diligence. It’s best to speak with at least two or three before making a final decision. Here are some considerations:

• Do you meet their minimum investment requirements? Wealth managers typically require minimum account sizes that start at $500,000 to $1 million or more.
• What are their rates? Consider whether you prefer paying a flat fee, hourly fee or percentage of your assets.
• What certifications do they have? At a minimum, a wealth manager should be a certified financial planner or chartered financial analyst, but you might prefer a Certified Private Wealth Advisor. Look for one with a minimum of five years of financial planning experience.
• Who have they worked with? Try to find a wealth manager who comes highly recommended by your colleagues or other advisors.

You can also review lists of highly-rated wealth management firms to find a qualified advisor.

Caitlyn Moorhead and Melinda Sineriz contributed to the reporting of this article.

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