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Is a wealth manager worth it...can’t I just invest myself?

What’s ironic about wealth management is that it’s absolutely not just for the wealthy! According to Wiser Wealth Investor,wealth management is making the most of one’s income to create well-being and prosperity. While many wealth management firms generally require a hefty minimum in assets of $1 million or more, you might not have yet acquired that much but still need guidance in your financial planning to build toward retirement and invest to support your goals. 

But is planning for your financial future something you can do by yourself, or do you really need a wealth manager to figure it out for you? First let’s see what wealth management actually is and what a wealth manager actually does. 

What is wealth management? 

Wealth management is all about creating a specially tailored investment strategy and planning for a client to manage their assets, according to NerdWallet. Wealth managers generally aim their services at the highly-affluent and ultrawealthy and consult on subjects such as how to avoid estate tax. Wealth management is often a team effort, involving other specialists like a lawyer and an accountant who all work together for their client. 

What’s the criteria to be a wealth manager? 

Many wealth managers are registered investment advisors, according to the U.S. Investment Advisers Act of 1940, who engage in the business of providing advice for compensation. Someone with the credentials of a certified financial planner (CFP) is the type of advisor with several years of planning experience, has passed certain exams, and adheres to strict ethical standards set by the Certified Financial Planner Board of Standards

How much money do I need for a wealth manager? 

According to NerdWallet, some companies require at least $2 million, while others demand anywhere from $5 - $10 million in investable assets. (But with 5-10 million to start with, feels like those folks have been managing pretty well on their own, no?) Those financial standards are clearly for a very small sector of the population, but there are select companies that will work with an investor who has a minimum of $250,000 of investable assets. 

How does a wealth manager get paid? 

According to Northwestern Mutual,there are three main ways wealth managers make their money, including fee-based planning according to their fee schedule, a percentage of assets under management, and product commissions whenever they make a sale. There may also be other fees involved, so it’s best to interview them to learn more about their services and how they’re compensated for their professional advice. 

What does a wealth manager do? 

From the figures above, you can see that wealth managers traditionally deal with high-net-worth clients. They obviously manage their client’s investments, but that’s just a small part of what they do, according to GoBankingRates. A highly-skilled wealth manager will take a holistic approach to financial planning, including these 6 steps in the financial planning process from the Certified Financial Planner Board of Standards

  • Understand personal and financial circumstances – the financial planning process begins with the manager establishing a relationship to understand your goals, lifestyle and values. When you’re working toward a specific goal -- buying a house, planning for your children’s education, starting a business or funding your retirement – you’re more likely to stick to your plans to get there. 

  • Identify and select goals – now you need to figure out how you’re going to achieve those goals, but that comes at a price. You may need assistance to determine how much college will cost when your children reach that age, or all the resources needed to start a business. 

  • Analyze the current course of action – while it’s necessary to have goals, you have to figure out how you’re going to get there. First, how far are you away from your goal and what are your assets (real estate, bank accounts, stocks, etc.) and liabilities (mortgages, loans and credit card debt). 

  • Develop and present financial planning recommendations – you know where you’re going, now you need to know what your expenses are in the form of housing, transportation, loans, utilities, food, clothing and insurance. 

  • Implement the financial planning recommendations – now break down your goals into categories to see what needs to be short-term (3 years), mid-term (3 to 10 years) and long-term (10-plus year) to achieve. 

  • Monitor progress and update – to know how well you’re doing on your plans, you need to periodically access your progress, at least once a year if not quarterly, or when a major life event occurs, including a marriage, divorce, birth of a child, death of a family member, or job loss. 

Now that you know what is involved in wealth management and what a wealth manager does, do you think you need these services, or can you do them yourself? Consider these 3 reasons courtesy of the Robb Report to determine if you might need a wealth manager: 

  • Net Worth – While every investment firm seems to have their own threshold of minimum assets, if you are a high-net-worth individual (HNWI) with more than $750,000 in investable financial assets (or a net-worth in excess of $1.5 million), according to the Securities and Exchange Commission (SEC), then you may want to consider working with a wealth manager. 

  • Legacy – If you’re planning to leave a financial legacy to your survivors to protect your assets in a structured, tax-advantaged way (as in a trust) to ensure they receive everything you want them to, then you may need a wealth manager. 

  • Complex Finances – If you’re nearing retirement and need advice how to plan for the future, including long-term care, rising medical costs and depletion of social security benefits, then a wealth manager can advise on esoteric investments, including hedge funds, private equity, collateralized-debt, real estate and multi-currency emerging markets. 

What if you want to have all those types of financial interests and goals, but just aren’t there yet to qualify for a certified wealth manager? Do you think you can develop your own plan by yourself? According to a Charles Schwab survey, only 40% without a written financial plan felt financially stable and only 18% of non-planners felt very confident they would reach their financial goals.   

If you’re like those surveyed, you should first consider starting with a financial advisor, specifically a certified financial planner (CFP), and be sure to interview them so that your styles and personalities match, to ensure they’re certified and credentialed, and that you understand the specifics of their fee schedule.   



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