Wealth Management Explained: Services, Fees, and Choosing a Manager

What Is Wealth Management?

Wealth management is an investment advisory service that uses financial services to address the needs of affluent clients.

Using a consultative process, the advisor gleans information about a client’s wants and specific situation. They then tailor a personalized strategy that uses a range of financial products and services to help the client achieve their goals. This can include money management, investment advice, estate planning, accounting, life insurance, retirement planning, and tax services.

While fee structures vary across comprehensive wealth management services, they are usually based on a client’s assets under management (AUM).

Comprehensive Overview of Wealth Management

Wealth management is more than just investment advice. It can encompass all parts of a person’s financial life.

Instead of receiving advice and various products from multiple professionals, high-net-worth individuals may be more likely to benefit from an integrated approach, where all services come from or are managed by a single source.

Tailored Solutions for High-Net-Worth Individuals

In this approach, a wealth manager coordinates the various services needed to handle their clients’ assets. They will create a strategic plan for their current and future needs. Those needs may include will and trust services, business succession planning, wealth transfer, and more.

Some wealth managers offer general financial services, while others specialize in areas like cross-border wealth management. Specialization often depends on the manager's expertise or the firm's focus. This specialization may be based on the expertise of a particular manager or the primary focus of a wealth management firm.

Sometimes, an advisor collaborates with external financial experts and the client’s service professionals, like an attorney or accountant, to create the best strategy. Some managers also provide banking services or advice on philanthropic activities.

Wealth Management in Action: An Example

Generally speaking, wealth management offices employ experts and professionals in different fields. For instance, consider a client who has $10 million in investable assets—in addition to a trust for their grandchildren—and a partner who has recently passed away.

Such an office would not only invest these funds in a discretionary account but also provide will and trust services required for tax minimization and estate planning. 

A family office is a type of private wealth management firm that handles these needs and much more for ultra-high-net-worth clients. For example, its staff may also provide budgeting assistance, money education services, and concierge services for non-financial needs (such as household management, schooling, and travel).

Navigating Different Wealth Management Firm Structures

Wealth managers may work as part of either a small-scale business or a larger firm, one generally associated with the financial industry. Depending on the business, wealth managers may function under different titles, including financial consultants or financial advisors.

A client may receive services from a single designated wealth manager or may have access to the members of a specified wealth management team.

Advisors at an investment firm often know more about investment strategies, while those at large banks may focus on trusts, credit options, estate planning, or insurance.

Understanding Wealth Management Fee Structures

Wealth managers can charge for their services in several ways. Some work as fee-only advisors and charge an annual, hourly, or flat fee. Some work on commission and are paid through the investments that they sell.

Fee-based advisors earn a combination of a fee plus commissions on the investment products that they sell.

A survey of financial advisors found that the median advisory fee (up to $1 million AUM) is just around 1%. However, some advisors charge more, especially on smaller account balances. Individuals with larger balances can often pay substantially less, with the median AUM fee declining as assets increase.

Evaluating Wealth Manager Credentials

Check the credentials of a professional of interest for an idea of their designation and training. You want to select someone who best suits your needs and situation.

The top three professional advisor credentials are Certified Financial Planner, Chartered Financial Analyst, and Personal Financial Specialist. Many websites for professional certifying organizations allow you to vet if a member is in good standing or has had disciplinary actions or complaints.

The Financial Industry Regulatory Authority (FINRA) has a tool that explains professional designations. You can also see whether the issuing organization requires continuing education, takes complaints, or has a way for you to confirm who holds the credentials.

Final Insights on Wealth Management Practices

A wealth manager starts by developing a plan that will maintain and/or increase a client’s wealth based on their financial situation, goals, and risk tolerance. The manager looks at each part of a client’s financial picture, whether it's tax planning or wills and estates, to protect the wealth of the client and help them achieve their goals.

A wealth manager meets regularly with clients to update goals and rebalance the financial portfolio. Their fees are typically based on a percentage of the client's assets.