Wealth management is a financial services term that gets thrown around a lot and, yet, is not well understood even by people in the business. Wealth management and financial planning are very similar paths. They both assist clients with investment decisions and goals. However, what uniquely distinguishes the field of wealth management from financial planning is the clients. A wealth manager is someone who consults with high-net worth clients to achieve their goals related to wealth accumulation, protection, and distribution.
Why would high-net worth clients make wealth management different from financial planning? Think of a wealth manager as a surgeon and a financial planner as a family practitioner. There is a unique specialization that is required for wealth management. Estate planning and strategies, as well as income tax planning, differ greatly for the high-net worth populations. Social Security benefits and retirement planning, as well as succession planning, also differ for clients with a high-net worth who probably will not need all of their retirement savings.
So, what is a high-net worth client? There isn’t a total consensus in the industry on that question. Some define it as $1 million or above, while many put it in the $5 to $10 million range.
The wealth manager position has a similar process to other related occupations, such as financial planners, financial advisors, or investment advisors. The bulk of the work revolves around talking with clients, helping them identify their goals, and determining a strategy for achieving their goals in the short and long-term.
Wealth managers tend to have fewer clients than financial advisors or financial planners because their clients have more needs and require more attention. Wealth managers evaluate their clients’ needs and gain an understanding of the vehicles of their wealth. The wealth mangers then analyze the information and develop recommendations for their strategies. This involves interacting with other financial professionals the client works with as well.
Wealth managers offer services that include investment advice, accounting/tax services, retirement planning, and legal/estate planning. The advantage to clients is that they get all of these services for a single fee, and the wealth manager then coordinates input from the other financial experts on the client’s team, such as attorneys, accountants, and insurance agents. The more wealth a person has, the more financial decisions they need to make. The options available can be overwhelming, and a wealth manager can steer clients toward ideas that make the most sense for them.
Some important knowledge areas for wealth managers include effective strategies for giving to charities, intra-family transactions, multi-generational estate plans, and understanding the impact of partnerships and illiquid assets in the estate.
Wealth management is a specialization, so it is important to get your feet wet in the industry first. Earning a designation like the Chartered Financial Analyst® will give you the deep knowledge you need to analyze investments, stocks, bonds, hedging strategies, financial statements, and other macro and microeconomic factors that could impact markets. The CFA® exam process takes a minimum of three years, and the competition is fierce. But, it will give you comprehensive understanding of financial markets and how they relate to one another. To learn more about the path to CFA, visit Kaplan Schweser.
The CERTIFIED FINANCIAL PLANNER™ certification is another good option for someone looking to become a wealth manager. The CFP® certification will give you fundamental understanding of general financial planning principles, risk management, investment planning, tax planning, retirement and income planning, estate planning, and financial plan development. Unlike the CFA program, you can earn the CFP® mark in as little as one year. Learn more about CFP® certification at Kaplan Financial Education.
What if you could job shadow eight finance professionals in a wide variety of careers, with an array of career paths, all in a single day? We created this eBook to make that possible. Inside, we profile eight successful finance pros who at one time were in the same spot you're in now. We asked them what they do, what they like about it, and how they got to where they are today. We compiled their responses in this valuable eBook for college students planning to launch a finance career.