The financial advisory industry contains countless iterations of services, products, and professionals. The title of an advisor and how they define their services are important, but there is no consistent rulebook for how different services are defined. This results in a lot of confusion when someone is looking for financial help. Two financial advisors with the same title might offer two vastly different suites of services; one may specialize in tax and financial planning, while the other manages investments for their clients directly.
The term “Wealth Management” is a broad term that encompasses multiple services. It is generally a suite of services that are geared towards the needs of high net worth clients. It is a consultative process whereby the advisor gleans information about the clients’ wants and tailors a custom strategy utilizing appropriate financial services. The most common application of wealth planning is a combination of comprehensive financial planning and investment or portfolio management. These two services often go hand-in-hand and the financial planning process informs and guides the investment process.
Wealth Management is different from other financial advisor services in a number of important ways. First, it is usually performed by an advisor who charges a fee instead of an advisor who takes a commission for selling a product. These “fee-only” advisors are often also held to the fiduciary standard, which requires them to act in the best interests of their clients at all times. Commission based advisors generally sell a product that addresses a specific need of the client, versus a fee-only advisor who provides comprehensive wealth management. Wealth Managers also often focus on financial planning. Planning generally includes retirement cash flow planning and planning for specific goals such as college expenses, weddings, new home purchases, etcetera.
In conclusion, wealth management refers to a comprehensive approach to financial services for private clients. Wealth managers are often held to a higher standard of practicing than are other financial advisors as they offer planning services and investment management for their clients. Other financial advisors who are not wealth managers generally only offer a subset of the services that wealth managers provide as a full service.
Wealth Management Blog:
Top Wealth Management Services:
- Fee-only Investment Management
Wealth management generally revolves around investment management. This means the wealth manager is actively overseeing and managing portfolios for their clients. This may be accomplished with numerous different strategies and investment philosophies depending on a client’s age, risk tolerance and other factors. Investment management also requires a custodian to hold the assets of the client and provide a separate structure for trading, reporting and account statements. Depending on the wealth manager’s firm structure, the custodian may be the same firm that the advisor works for (in the case of large brokerage firms who have their own advisors) or a third party firm that is independent of the wealth management firm.
- Financial Goal Planning
- Planning for specific goals is another major service offered by wealth managers. The planning process is often a crucial source of guidelines for the investment program. For instance, if a client is planning to spend a certain amount of money each month in retirement, that is a necessary point to include in the investment program. If a client expects an inheritance that will also affect the investment style. There are countless scenarios that can be projected and planned for that and that offering is a big advantage of having a comprehensive wealth manager.
- Portfolio and Stock Analysis
- Wealth management often includes analysis of specific stocks as part of building investment portfolios. Some managers may delegate investment authority to an outside manager, but many perform their own investment selection in house. If a Wealth Manager manages money in house, they may offer a portfolio of stocks that clients may be invested in. They also might select specific bonds and build customized bond portfolios within client accounts. Managers who outsource investment management may offer an “open architecture” strategy which involves picking broad based ETFs and mutual funds to build portfolios. In addition, some wealth managers have agreements with separate investment companies that become responsible for managing parts of client portfolios. These are often call “Separately Managed Accounts” or SMAs. Whichever strategy the wealth manager chooses, they will generally be the quarterback for their clients investments and the planning process is always informing the investment style regardless of which management style is used.
Thomas Bunting is a Financial Advisor at Winthrop Partners. He has more than 50 years of experience in accounting, financial planning, and tax planning. Prior to joining Winthrop Partners, Tom held the roles of partner, managing partner, and senior partner with a mid-sized CPA firm that provided a full range of accounting, tax and financial planning services.
Tom is a member of the American Institute of Certified Public Accountants, the Personal Financial Planning and tax sections of the American Institute of Certified Accountants, and the Pennsylvania Institute of Certified Public Accountants. He was also a former member of the AICPA governing council and a past president of the PICPA. He earned his BS in Accounting from Temple University.