They say money makes the world go around, and in this case, they’re right. Try as we might, we simply can’t live without it—and making smart decisions about money is critical, especially when dealing with a substantial portfolio. This is where wealth management comes in.

Understanding the Importance of Wealth Management

Wealth management is a holistic approach to investments and all aspects of household finances. It is about making strategic decisions and employing effective strategies for managing a diverse portfolio.

First, it is important to understand the difference between income and wealth. Income is money earned from any number of sources like employment, a business, investments, or social security. Wealth, on the other hand, consists of the total value and purpose of your assets, such as property (e.g., homes, luxury vehicles, art, etc.) and savings. 

Wealth management services, which are offered by financial firms that employ qualified advisors such as Certified Financial Planners (CFPs), are an ideal strategy for individuals or families that have substantial financial portfolios. These services involve a suite of services for managing wealth.

What Is Included in Wealth Management Services?

Wealth management services employ many different techniques to help individuals secure their financial success. These services take a multi-level approach by assessing your current financial situation, identifying your short- and long-term goals, and helping to determine a plan to both secure your wealth and help it grow.

In addition to these evaluation and planning techniques, wealth management advisors offer retirement planning, estate planning, and tax planning, such as advising on when and how to make charitable contributions and helping optimize cash-flow for tax efficiency. Investment management is also an important component in which advisors guide clients to make sound investments in stocks, bonds, mutual funds, and EFTs that balance risk with reward.

What Are the Minimum Requirements to Open a Wealth Management Account?

Wealth management services are usually designed for affluent investors that have a significant portfolio. Most wealth management firms have minimum requirements to open these accounts. Ferguson-Johnson Wealth Management requires a minimum of $500,000 of investable assets to begin a relationship. Some wealth management firms have minimums of $1,000,000 or more.

Wealth Management Strategies for Long-Term Wealth Preservation

The first step in securing long-term preservation and growth of your wealth is to establish a financial plan, something a wealth management advisor can assist with. This will include diversifying your portfolio and ensuring that your asset allocation is balanced so a loss in one area of your portfolio won’t wipe you out financially.

Additional strategies may include investment evaluation and optimizing tax strategies to minimize your tax responsibility and advise on the tax implications of specific financial moves.

Once these strategies have all been employed, the final step is to keep working with your wealth management advisor to routinely re-evaluate your plan and make adjustments as needed.

Wealth Management Fee Structures and Benefits of a Fee-Only Approach

Wealth management firms are usually paid by either a percentage of the assets that they manage, commissions, retainer or flat-fee arrangements, or a combination of these. 

In many cases advisors that receive commissions receive compensation from other sources besides the client themselves. In these situations, it is important to be aware of the incentives that may be going into recommendations that are being provided. 

Fee-only wealth management advisors can only receive compensation from their clients. They cannot accept commissions or kick-backs from products or services they might recommend. .

The benefits of working with a fee-only wealth management firm include knowing that your financial advisor is making decisions based on your best interest, not theirs. The transparency associated with a fee-only approach also fosters a greater level of trust between client and advisor, leading to a stronger sense of confidence in your investment strategy.

How Do You Pick a Wealth Management Firm?

There are several factors that can help you select the right wealth management firm:

• Consider how much wealth you are going to have an advisor help you with. A firm that handles smaller client accounts may have a different approach than a firm that works with larger clients. You want to select one with experience handling a portfolio similar to yours.
•     Look for a professional team with CFP® professionals on staff. When it comes to your future and that of your family, you want to trust your portfolio to someone who is qualified and trained. The CFP® is often considered one of the top designations available to be obtained in the wealth management industry. 
•     Seek professional advice from an impartial third party. Attorneys, such as tax attorneys, or CPAs often have great industry insight and can help advise you regarding firms that might be a good match for your specific needs.
•     Consider how you want to grow your assets. It is important to ensure that the investment philosophy of a wealth management firm and their advisors is in line with your personal goals.
•     Look at the number of years the firm has been in business. Experience counts, especially when it comes to your finances and the future of your family’s security.

Consider the number of clients a firm has. This can be an indicator of their experience and track record in successfully managing client accounts.

How Do Financial Advisors Help with Wealth Management?

Financial advisors who work with wealth management clients have a specific set of core competencies. They are trained, and should be experienced in, effective strategies for wealth creation and wealth preservation. They are also knowledgeable about the ins and outs of wealth transfer to minimize the financial repercussions of transferring assets through methods like gifting or inheritance.

They are also trained in the technical aspects of wealth management. For example, they have an intimate knowledge of capital markets, are well-versed in financial planning, and have extensive experience in designing diversified and well-balanced portfolios.

FAQs

What does fee-only wealth management mean?

Fee-only wealth management is when a wealth management firm or advisor is paid through clearly disclosed client fees, rather than collecting commissions from third parties. By working with a fee-only wealth management firm, clients may feel greater assurance that their advisor is working in their best interest.

How do I open a private wealth account?

Begin by selecting a wealth management advisor to determine if you meet the eligibility requirements. Next, you will want to determine your goals and formulate an investment strategy. From there, you simply have to sign an agreement with the wealth management firm and fund your new account.

How do I manage sudden wealth?

The important thing to remember with sudden wealth is not to make any drastic changes to your spending habits or lifestyle. The best first step is to speak with a wealth management specialist who can help you come up with a plan to meet your current and future needs and goals.

What are some alternatives to wealth management?

Alternatives to employing professional wealth management services include a self-directed investment approach where you conduct your own research and manage your own investment plan or use a robo-advisor in which you place your funds in an account that automatically invests for you based on an investment model that does not involve your personal input.