Have you managed to save a tidy nest egg, sold a house or business for a profit, and inherited a few bucks from Great Uncle Fred? It may be time to get hold of a professional wealth manager to help you protect and grow your assets.
A wealth manager is a financial advisor whose clients generally (but not always) have a minimum of $250,000 in investable assets. Registered investment advisors (RIAs) have passed a certification exam and are registered with the Securities Exchange Commission (SEC) or the state where they do business.
Depending on your planning and investment needs, you might also want to look for advanced qualifications such as Certified Public Accountant (CPA), Chartered Financial Analyst (CFA®), and Certified Financial Planner (CFP®).
Finding the right wealth manager can give you the peace of mind to stop worrying about money and experience life more fully.
Professional Wealth Management Benefits
- A definite plan
Your wealth advisor will work with you to clarify your financial goals and create a road map for how to get there. Once you’ve made a plan, your advisor will help you implement it and meet with you on a regular basis to make sure that it remains on track. Wealth advisors can also help you align your financial plan with your values.
- Portfolio management
Wealth Managers have the experience required to recommend suitable investments that balance risk and reward. Working daily with high-net-worth individuals, they understand the challenges of high-net-worth investing.
They can provide investment advice on risk assessment, asset allocation, tax management and diversification.
Even if you’re a financial whiz, having a third party manage your investments may make sense. Evidence in the field of behavioral finance suggests that our financial decisions are not always as rational as we would like to think, especially when trading on our own account.
Wealth managers have a legally binding fiduciary duty to put the best interests of their clients first. Often, but not always, wealth managers are compensated by retainers or a percentage of assets under management (AUM) – not from commissions. If so, the advice they provide isn’t conflicted the way it would be if they received compensation from the fund families of the investments they recommend.
- Work with other advisors
A wealth advisor can also work with your other professional advisors, like lawyers, accountants and insurance brokers, to align your investment plan with your tax, insurance and estate planning needs.
Other Financial Planning Needs
A wealth manager, often in conjunction with your other professional advisors, can help high-net-worth individuals put their financial house in order in many areas in addition to investment planning:
Wealth managers can help you explore retirement savings tools available – including retirement plans, Roth and Traditional IRAs, Health Savings Accounts (HSAs) and Flexible Savings Account (FSAs).
When you are retired, wealth managers can provide advice about your Required Minimum Distributions (RMDs) and determine the optimal time to begin taking Social Security payments.
- College and education
Wealth managers can advise how to save for college education or private school for your children. Among the options they can discuss are 529 college savings plans, trusts, and wealth transfers using Uniform Gift to Minors Accounts (UGMAs) or Uniform Transfer to Minor Accounts (UTMAs). They can also help evaluate available scholarship, loan, and assistance programs.
Wealth managers can work with your tax professional to maximize tax savings using tax-sheltered retirement and health accounts, tax-loss harvesting, charitable gifting and tax-sheltered bonds.
Wealth managers can work with your estate planning lawyers to integrate your estate planning with your overall financial plan. They can help position your assets to take advantage of the step-up basis, Unified Gift and Estate Tax Credit, and evaluate probate avoidance. They can also examine the pros and cons of various kinds of trusts, including generation-skipping, property, living, bypass, revocable and irrevocable trusts.
Wealth advisors can work with your insurance professional to evaluate the advantages and disadvantages of your health, life, disability, long-term care and annuity policies.
- Business and succession
A wealth manager can help entrepreneurs and other business owners negotiate the sale of a business, and make recommendations for investing the proceeds.
Wealth advisors can review the benefits of charitable giving during your lifetime and through your estate. Available strategies include gifting of appreciated assets, donor-advised funds, charitable trusts and private foundations.
Reaching Financial Freedom
Managing wealth intelligently and responsibly is a complex and challenging task.
As political philosopher and economist Edmund Burke put it: “If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.”
Hiring a wealth manager can make a big difference.