Wealth management isn’t just a task that your type-A friend undertakes to stay busy between working three jobs and saving the world with every volunteering opportunity (we all have one!).
Wealth management is actually crucial for not just protecting but growing the assets you’ve accumulated, so you can meet current financial goals and maybe even build a nest egg worth passing down to future generations.
However, just because wealth management is essential doesn’t mean it’s something everyone will be good at — or even take an interest in.
This is precisely why the wealth management profession was born.
Wealth managers pick up where the layperson’s know-how, time, and interest drop off. And they don’t do it for cheap.
If you’re intrigued by wealth management services but haven’t yet explored the details, this article will dive into everything you need to know:
- What wealth management services usually entail
- Who wealth managers are a good fit for
- What you might expect to pay if you were to hire a wealth manager
- The best tool to use if you decide not to invest in a wealth manager — or, to bring along if you do to make their services even more worth the expense
What Does Wealth Management Usually Include?
In an ideal setup, a wealth manager will start by taking a comprehensive look at your finances, your goals, and your lifestyle. A great wealth manager will then provide targeted financial advice and create holistic plans that address everything from investing to tax planning, business plans, charitable giving, estate planning, and beyond.
Then there’s the hands-on aspect of the job, which includes actively managing finances and investments in a way that furthers the goals you’ve worked together to set. Additionally, wealth managers should lead the charge on tracking progress, keeping goals up to date, rebalancing your portfolio to maximize returns while managing risk, and even recommending other tools or services that will extend their ability to protect and grow your assets.
Of course, the level of service and regularity of interactions with your wealth manager will ultimately be guided by your agreement with them. Later in this article, we’ll talk about the most common ways to engage and pay for wealth management services.
A Wealth Manager Is Worth It If…
Absolutely anyone can choose to hire a wealth manager or use wealth management services whenever they see fit. But if you’re on the fence about whether or not a wealth management professional can really upgrade the way your plan and manage your financial life, allow us to tell you more about four key cases when a wealth manager is a perfect fit.
You’re a High-Net-Worth Individuals (HNWIs) with a Lot of Assets
High-net-worth individuals (HNWIs) are people with a net worth of at least $1.5 million. Or, for a more pertinent measurement when talking about wealth management, people with at least $750,000 in investable assets.
People often arrive at such a net worth by investing in or inheriting a wide variety of assets. Additionally, HNWIs typically have the cash flow needed to cover the expense of wealth management services, the most comprehensive of which usually require hefty asset minimums and come at a decent cost. For example, to access Fidelity’s private wealth management services, a customer has to prove that they have $10 million in investable assets!
Between the need for hands-on asset management and the cost of that level of service, it makes sense for HNWIs with many assets to add a wealth manager to the roster of professionals on which they rely.
You Need The Holistic View Only a Financial Advisor Can Provide
Saving for retirement while also creating a trust, will, and other elements of your estate plan while also building a balanced investment plan while also working to minimize taxes?
That’s not only tiring — it also requires a holistic view of your entire financial picture and an educated view of wealth best practices to pull it off seamlessly.
If you’re not up to the challenge, running out of time, or just need a little support, you might find that a wealth manager is a good fit for your life.
You’re About to Make a Big Financial Move
Getting ready to purchase your first home? Seriously considering if you could pull off an earlier retirement than you were planning? Trying to determine the smartest way to sell your business — and live off the profits?
For those big financial moments where a do-over isn’t possible, it can’t hurt to consult with a wealth management professional who offers not just the knowledge but the experience, the tools, and the objective viewpoint you need to make a shrewd move.
Financial Planning Won’t Get Done Without One
Finally is the use case that most people fall into when it comes to hiring a wealth manager — those who know the job won’t get done without one.
Managing assets in a way that grows wealth while minimizing risk doesn’t just require expertise and tooling, it also requires one very precious commodity: time.
Time has to be spent acquiring assets, more time has to be spent researching the best strategies for managing those assets, and even more time has to be spent executing these strategies. And these things don’t just happen one time. Successful wealth management is all about consistency and repetition.
If you don’t have the time, or simply aren’t willing to spend the time required, to thoughtfully manage your wealth — the truth is that it’s probably not going to happen. And the longer you delay crucial financial planning, the worse your results will be when you’re finally forced to face it.
If wealth management keeps getting postponed in your household, wealth management services may be the way to go.
What Does Wealth Management Cost?
The fee structure for wealth management ranges widely, especially today when there are digital tools that help automate the process and make it less expensive.
NerdWallet, a financial company that’s seen a wide range of wealth management services, breaks down the approximate costs like this:
Now, let’s talk about what each of these payment plans means.
Percentage of Assets Under Management (AUM)
Wealth managers who implement an AUM pricing structure charge clients a percentage of the total value of the assets they manage for that client.
Robo-advisors, automated digital programs that manage financial assets, typically charge between 0.25% and 0.50% of the value of a client’s assets. For this yearly AUM fee, robo-advisors do things like create and monitor portfolios based on algorithms.
Traditional human wealth management professionals charge an average of 1% of assets under management each year. For this price, they typically provide comprehensive financial planning, advice, and guidance.
Instead of annual fees based on AUM, some wealth managers only charge for the hours they actively work on your finances. This hourly fee can range from $200 to $400 per hour. Wealth managers can provide whatever advisory services they choose on an hourly basis, from creating a financial plan that you carry out on your own to hosting one-on-one meetings to talk through retirement planning, investment management, and so on.
Wealth managers can also charge a single flat fee per task, or a monthly flat fee that allows you to retain their services whenever you need them.
Retainers can range from $2,000 to $7,500 a year, and these types of management packages usually include pretty comprehensive planning and management. Flat fees will vary based on the service. For something like a financial plan that a wealth management pro sets up and you enact, the cost may be between $1,000 and $3,000, according to NerdWallet.
The final common payment plan for wealth management is one that’s commission-based. Wealth managers who implement this package earn a commission when they make a sale on things like life insurance policies, investment products, etc.
The commission a financial planner earns will vary based on the item they sell, but for something like a mutual fund, a wealth manager may make 3% to 6% of your investment amount. These commissions typically come out of the investor’s pocket. And, it’s easy to see how a monetary offering could sway financial pros to make recommendations that aren’t necessarily in your best interest. For these reasons we, along with NerdWallet, recommend avoiding commission-based wealth advisors when possible.
Whether a Wealth Manager is Worth It or Not — There’s Kubera
The tough thing here is that only you can decide if a wealth manager is worth it for you.
If you fall into one of the most common customer types, and you’re happy with what their services may cost you, maybe you’re ready to hire a wealth manager.
No matter what you decide as far as the value of wealth management in your life, Kubera can help you in any scenario.
Kubera is an all-in-one financial tracking app that’s as useful for DIY investors as it is for financial advisors, wealth managers, certified financial planners (CFPs), and other financial pros.
With Kubera’s wealth tracker, individuals can monitor any, and we mean any, type of asset. From bank accounts to real estate, digital domains, antiques, NFTs, rare metals, crypto and DeFi coins, and beyond — if you can hold it, Kubera is ready to track it.
The value of account-based assets will update in real-time. For everything else, Kubera’s modern interface is easy to keep accurate with asset purchase price, current value, cash flow, attachments, and more.
With the addition of automatic ROI calculations and charts that make it easy to see asset performance and net worth growth over time, Kubera is the perfect wealth management tool for those who aren’t ready to add a wealth manager to the mix.
However, it’s also a great companion tool for those who are.
Kubera is easy to white-label, so wealth managers can set it up to serve as their primary client portal. With Kubera’s easy-to-use interface making it delightful to enter asset and account info, you’re more likely to keep your financial info up to date — and enjoy more accurate wealth advice and management as a result. In this way, Kubera can be an essential facilitator for a more modern, more open, and more successful advisor-investor relationship.
To get started on your DIY wealth management journey, sign up for Kubera today. To use Kubera alongside a wealth manager and increase the effectiveness and value of their services, share our demo request form or contact info (firstname.lastname@example.org) with your pro today.