The wealth management industry is currently undergoing a new era of change as fintech companies come to the fore and people increasingly look at ‘robo- advisers’ and other technical solutions when it comes to looking after their money.
However, there are still a number of advantages to using wealth management services. Dependent upon your financial circumstances, utilising the services, knowledge and expertise of wealth management professionals could be the right option. Understanding when and why such services are suitable and the ideal option is key to utilising the services which will ultimately be provided.
What Does a Wealth Management Adviser Do?
Wealth management refers to the services provided by financial advisers who are responsible for ensuring the optimisation of a client’s portfolio in order to accumulate and often grow their wealth. This will be dependent upon several factors, including how comfortable the client is with risk. Based on this preference, assets are invested accordingly whether it be through savings accounts, portfolios or in specific stock options.
In addition, a wealth management adviser will take into account their own short and long term financial goals which play an important role in financial planning, portfolio management and the offering of other financial services.
Sometimes, private banking and wealth management services get mistaken for being one and the same; however, they are not. The difference between the two is that financial advisers in private banking are not always involved directly with optimising a client’s portfolio although they may offer guidance.
How Does Wealth Management Work?
A client will usually have a designated personal financial adviser who will conduct meetings and will keep in regular contact in order to discuss goals, attitude towards risk, and any stipulations as to how assets are invested. An investment strategy is then drawn up, recommendations are made based upon comfort levels associated with risk and the adviser helps the client to reach their financial goals, dealing with the execution of investments on the customer’s behalf. The wealth management adviser has to have the approval of the client before any changes are made to a portfolio.
In terms of fees that need to be paid for wealth management services, this is dependent upon the company in question. As the FCA states, some charge clients on an annual basis (this is typically based on a percentage value on your investment portfolio) other companies will charge on commission and through annual charges.
You should make sure you are fully aware of how much and how often you are being charged for wealth management prior to setting up an account. However, you should also take into account when assessing fees how the wealth management company can help you in terms of investment planning and performance and gains in relation to their expertise. Also important to consider, is the manager’s facilities and networks available; which would often be difficult to acquire as a DIY investor or through an automated channels.
Utilising Wealth Managers
A number of wealth management companies will have ‘minimum assets’ requirements before one is able to access their services. This means that they may take into consideration savings made via a Self-Invested Personal Pension (SIPP), trusts, ISAs, bank accounts and other business accounts. On average, wealth management companies will accept people with a minimum of £20,000 in assets.
What are the Benefits of Wealth Management?
If you meet the requirements for wealth management services, having a financial adviser can be advantageous in a number of ways:
- Those who want a financial portfolio beyond stocks will benefit from the knowledge of wealth management advisers, who are experts in their field and can help when it comes to making sound investments avoiding bad one
- They can help to make sense of otherwise confusing financial markets and therefore make it easier for you to understand investment decisions
- Wealth managers will provide a personalised service and guidance that is catered to the investor’s specific financial circumstances
- Wealth managers can help with capital preservation helping to devise a plan to deal with a number of complexities, such as losing money on your assets as a result of tax issues or management fees
- Wealth managers have multidisciplinary skill sets, which means they can help with a host of financial matters. For example, not only can they help with allocating investments, but they will also be able to help with tax issues and retirement strategies.
- They can help to achieve long-term financial goals by using their expertise to put together a wealth management strategy to increase growth
- It can be a time-saving strategy, as many high net worth (HNW) individuals are simply too busy to handle their wealth. An adviser looks after the portfolio on a client’s behalf and can help to achieve long term goals