What Is Wealth Management?

Definition & Examples of Wealth Management

Definition

Wealth management is a kind of financial advisory service for accredited investors and other people with high net worth.

Wealth manager meeting her client in her office
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Wealth management is a kind of financial advisory service for accredited investors and others with high net worth. Wealth managers provide advice about investing, estate planning, taxes, and anything else that can help grow a client's wealth.

Understanding how wealth management works and how it compares to asset management can improve your financial picture.

Definition and Example of Wealth Management

People who have a high net worth may need more services than those offered by traditional financial advisors. Those with millions—perhaps even billions—of dollars may have complex portfolios, complicated tax situations, and other needs that are unlikely to apply to average investors.

Wealth managers often have access to a wider range of financial products and services. Clients pay a fee, but they receive strategies designed with their finances in mind. Services offered by wealth managers may include:

  • Investment management and advice, including retirement planning
  • Accounting and tax services
  • Review of health care and Social Security benefits
  • Charitable giving plans
  • Help with starting or selling a business

You likely don’t need a wealth manager if you don't have a high net worth. You may instead prefer to pay for a financial or investment advisor who can help you grow your money over time.

Note

A financial advisor may be able to help you build your wealth. But a wealth manager can help you manage your money when you’ve already achieved a high net worth.

How Does Wealth Management Work?

Like most financial advisors, wealth managers earn their income by taking a percentage of the assets they manage. These fees can vary among firms and even across different types of accounts within the same firm. You can expect to see fees start around 1% of assets under management.

Breaking into wealth management is a good career move for financial advisors. A wealth manager would earn $50,000 in commissions in a year from one client if they were to charge a fee of just 0.50% to a client with $10 million in their portfolio. The more clients a wealth advisor has, the more those fees add up.

Note

Wealth managers will often compete for "whale" clients with the highest net worth. They may charge a lower-percentage fee as a result if you have a higher net worth. The more assets under management, the more fees they pull in, even if they're charging a lower fee in terms of percentage.

Wealth Manager Qualifications

There are no set requirements to become a wealth manager, but you're likely to find certain backgrounds among these professionals.

Most wealth managers have college degrees, often in a field such as finance or accounting. Many even have master’s degrees, law degrees, or other certifications. It may also be wise for them to become Certified Financial Planners (CFP) and Certified Private Wealth Advisors (CPWA).

Wealth managers are often expected to execute the buying and selling of stocks, bonds, and other investments. They're usually required to pass the Series 7 exam administered by the Financial Industry Regulatory Authority (FINRA).

How to Find Wealth Managers 

You have many options if you need a wealth manager. Shop around, and find one who best suits your needs. Many people choose to work with a private wealth manager who can offer highly personalized services.

Others may choose to work with the wealth management divisions of large financial institutions. These services are less personalized, but they can leverage greater amounts of capital by pooling the resources of many wealthy clients.

Most big banks have wealth management divisions.

Wealth Management vs. Asset Management

Wealth Management Asset Management
More broadly focused than asset management More narrowly focused than wealth management
Concerns assets, taxes, trusts, and more Concerns assets such as stocks, bonds, real estate, and cash
Is for individuals or families Can apply to individuals, businesses, or any other entity
Reserved exclusively for those with high net worth Is available in some form for everyone

Wealth management is like asset management in many ways. But wealth management is a much broader practice. The difference is clear when you think about the two terms. "Asset management" concerns assets, including cash, stocks, bonds, and real estate. "Wealth management" concerns all aspects of wealth, including tax issues, business ownership, and legacy issues that will affect your family for generations.

Asset management is also more widely available. Wealth management is generally reserved for those with high net worth. Asset management, on the other hand, can be used by anyone. Even businesses can make use of asset management, which ensures that company assets are being used in the most efficient way possible.

Key Takeaways

  • Wealth management is a kind of financial advisory service that's generally only offered to those with high net worth.
  • Millionaires and billionaires are the most likely to need the services of a wealth manager.
  • Wealth management can help you make choices related to investing, retirement and estate planning, taxes, accounting, and much more.
  • Wealth managers usually earn money by charging a commission based on a percentage of the assets they manage.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Financial Industry Regulatory Authority. "Series 7 – General Securities Representative Exam."

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