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Retirement

7 Minute Read

What Is Wealth Management?

7 Minute Read

Wealth Management

If you’ve been working hard and investing for years, don’t be surprised if you look up one day and find that you’ve built a nest egg worth millions of dollars.

After all, there are more than 10 million millionaire households in the U.S. today. Beyond that, there are more than 1.4 million households with an “ultrahigh net worth” between $5 million and $25 million.1 The American Dream is still alive and well!

While you don’t need to have millions of dollars to get investing advice, there are some unique challenges and opportunities that might pop up as your wealth builds. And that could require a more tailored approach!

You might find yourself in a higher tax bracket than you’ve ever been before. Maybe you’re trying to figure out how to use your wealth to do good in your community. Or maybe you want to make sure you’re leaving behind a legacy that will be a blessing to future generations.

Be confident about your retirement. Find an investing pro in your area today. 

Now hear me, wealth is a tremendous blessing for you and those around you. There’s no doubt about that! But it also comes with a tremendous responsibility and—like anything else that’s important in your life—it has to be managed correctly. That’s why wealth management might be worth looking into.

What is wealth management? And what does a wealth manager do?

Wealth management is designed specifically to help high-net-worth clients continue to grow their wealth, protect their assets and reduce their financial risks.

It’s a form of financial advising that goes deeper than just finding, picking and choosing investments. Wealth management is like a premium service that combines a bunch of financial services together to meet the needs of wealthy individuals.

Think of wealth managers as the swiss army knives of the financial world—they’re able to provide counsel on a wide range of financial issues or situations unique to clients managing millions of dollars in assets.

Here are the services that usually fall under the umbrella of wealth management:

  • Financial planning
  • Investment management
  • Philanthropy advice
  • Legal planning 
  • Estate planning
  • Accounting and tax services
  • Retirement planning

What strategies are used in wealth management?

If you’ve ever gotten fitted for a suit or a dress, you know it’s quite the experience. A tailor invades your personal space to take measurements of your arms, your legs and your chest, and then they’ll use those measurements to craft an outfit that fits just right.

A wealth manager will do the same thing for your finances. They’ll get to know you and your financial situation and then craft strategies and a game plan that makes sense for you.

How exactly will a wealth manager help you get to where you want to go? I’m glad you asked! Here are some of the strategies a wealth manager commonly uses to advise their clients and help grow and protect their wealth: 

1. Set financial goals.

Whether you want to travel the world in retirement or start a nonprofit organization (or maybe both!), a wealth manager can help you set clear goals that will bring you closer to making your dream retirement a reality. After all, a dream without a plan is just a wish!

2. Maximize your investment options.

Like most investment professionals, a wealth manager can help you pick and choose growth stock mutual funds that have a long track record of success and will help your money grow. They can also help you explore other ways to grow your money, such as real estate investing.

3. Optimize your tax situation.

Most people who need a wealth manager are likely to be in the highest tax bracket, which means they’re sending a good chunk of money to the IRS! I’m all for giving Uncle Sam what’s owed, but not a penny more. Wealth managers can help you find smarter ways to approach investing that will help you keep more of what you earn instead of losing it to taxation.

4. Get the right insurance in place.

If your net worth is above $500,000, you’ll want to take a look at umbrella insurance, which is an extra form of liability insurance that protects you from large claims or lawsuits. One bad car accident, for example, could lead to millions of dollars in damages and injuries that could leave you digging into your retirement funds or going back into debt to cover the costs. Umbrella insurance can shield you from a hailstorm of hefty legal bills!

5. Create or update an estate plan.

Listen to me, I’ve seen too many families ripped apart because someone in the family died and they didn’t leave clear instructions for how to divvy up what was left behind. Don’t let that be you. Good estate planning means having a plan in place for all your stuff once you pass away. That means everyone knows who gets what! To be clear is to be kind, and a good wealth manager can help walk you through the steps of creating a good estate plan.

How much money do you need for wealth management?

Like a rollercoaster that won’t let you ride unless you’re a certain height, many investment firms require that you have a certain amount of money invested before you qualify for their wealth management services. How much money are we talking about? A lot.

Brokerage firms usually require account minimums of at least $2 million, $5 million or even $10 million just to qualify for their wealth management services. That’s a pretty hefty price of admission!  

But listen, you don’t need to have millions of dollars sitting in your investment accounts to get some financial help. Our SmartVestor Pros are investment professionals who will sit down with you whether you have $10 million or you’re just getting started with investing. 

Some places might offer a more “stripped-down” form of wealth management if you have around $250,000 or $500,000, but for the most part you’ll need to have millions of dollars invested in order to work with a wealth manager.

How do wealth managers get paid?

Wealth managers normally earn their income by charging a percentage of the assets they manage—generally around 1% annually, but it depends on the firm. If you have $5 million worth of investments with a wealth manager who charges a 1% fee, you’d pay them $50,000 in commissions to advise you each year. And you’re just one client!

It’s no wonder that wealth managers will often fight over the chance to work with clients worth millions—or even billions. Sometimes they’ll even charge a lower rate for clients with higher net worth. After all, the more money that’s under their management, the more they’ll rake in with fees.

Do you really need a wealth manager?

It depends. You know that song that basically says, “more money, more problems”? It’s true, in some cases!  

As your wealth grows over time, your financial situation becomes more complex and there are certain forces around you that will threaten to chip away at your wealth. I’m talking about things like estate taxes, fees and inflation. Having a wealth manager by your side can help you navigate through those complex issues and avoid some serious financial pitfalls.

Is wealth management right for you? Talk to a pro.

Still on the fence about wealth management? One of our SmartVestor Pros can help you answer any questions you might have. They are investment professionals who can help you figure out whether or not wealth management services are the right option for you as you move forward toward your financial goals.

Find your SmartVestor Pro today!

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