If beauty is in the eye of the beholder, so is the definition of wealth management. Wealth management is determined by the client. Here we present our Starter’s Guide to Wealth Management for Business Owners and Executives.
What is Wealth Management?
If you ask anyone in the financial services industry what wealth management is, you will get a variety of answers. Each person would answer based on which products and services they offer.
Who is Your Wealth Manager and What Do Their Credentials Mean?
For example, an insurance company may say that its agents are wealth managers, even though they only sell insurance. Likewise, an investment firm may only handle your investments, but still call those services wealth management.
When Do You Need to Consider Wealth Management?
If you were to ask everyday people what wealth management is, you would still get different answers. First, the definition of wealth is greatly varied depending on a person’s opinion of what constitutes wealth. Some may consider $10,000 wealthy while others would consider $100,000 or even $1 million to be wealthy. Secondly, most people have never thought about the many different ways to mange their wealth.
How Does Wealth Management Benefit Business Owners and Executives?
Media and press members seem to agree with the definition given by those in the industry. “Wealth management is the consultative process of meeting the needs and wants of affluent clients by providing the appropriate financial products and services. Wealth management entails coordinating a team of experts to address the needs and wants of affluent clients”, according to Russ Alan Prince, a Forbes contributor.
However, most families cannot afford the costs of this level of service at their current level of wealth. So, this definition only applies to about 1-3% of U.S households.
[Related: Do I Need Wealth Management?]
What are the Different Levels of Wealth Management?
Wealth management is the application of services, products, and processes that are intended to protect, enlarge, disseminate and utilize one’s wealth. This will, of course, depend on a person’s level of wealth.
The level of wealth will determine which products and services the client can afford and whether the client can mange their wealth with a team of people, or by working with different individual providers.
Wealth can be broken down into three groups:
Slight Wealth– Someone with few resources probably can’t afford management services. They likely keep a home, and food on the table but have no surplus resources to protect their limited wealth.
Modest Wealth– This can be characterized as “middle class”. With more abundance there are ore options available and these individuals are more likely to be able to afford to utilize techniques to grow, protect, and disseminate their wealth.
This might include planning for educational costs, retirement, buying specific types of insurance, or hiring an estate planning attorney. These products are usually obtained from separate providers instead of one large firm.
Abundant Wealth– This is the level that the industry or press refer to when speaking of wealth management. With this level of wealth, there are more assets which means things are more complex but there are also more options available. It is very common to use an overall approach to management with this level of wealth.
[Related: Investment Planning]
For these affluent individuals, there are generally two approaches to management:
Single Office Wealth Management
This approach is usually offered by family offices, brokerage firms, and large banks. The firm will have staff members that deal with specific areas like risk mitigation and others that deal with investment, and professionals that handle tax planning, estate planning, etc. all in the same office.
Broker-dealers have quickly realized the value in helping their advisors offer additional services for these wealthy individuals.
Collaborative Approach to Wealth Management
With this approach, an individual or a firm will act as the center of a team of advisors. The approach may include a CFP (Certified Financial Planner) professional to provide investment management and financial planning but the CFP professional would work in coordination with the client’s other advisors, such as insurance, legal, and tax advisors.
This creates an integrated approach to protecting, utilizing, growing, and disseminating the wealth of the client.
Wealth Management in Northern Virginia and South Carolina
No matter which level of wealth you are currently in, it is very important to have a plan to protect and grow your wealth. If you are ready to make a plan, contact the experts at Blisk Financial Group and get started today.