Do you have dozens of big money questions rattling around in your head, about IRAs, index funds, retirement and more? Knowing how to manage your assets and grow your wealth can be a challenge, especially as your financial needs change over time. Consider turning to professional financial services to get all your questions answered.
What is Asset Management?
Asset management is a service that helps individuals or corporations grow their money. You allow a financial services institution to guide your portfolio and in turn, the institution determines which investments are best to grow your wealth. Here are the pros and cons of hiring an asset manager.
- You’ll access a wider range of investment opportunities. You can take advantage of traditional and alternative investment services and funds you may not be aware of — because asset managers come up with ways to help people grow their money all day, every day.
- You can minimize risk and maximize rewards. The goal of asset management is to grow your assets over time and mitigate risks by planning for ways to avoid or minimize losses.
- Everything is in one place. You can easily keep track of what you own, where your investments are located and how your investments are doing.
- Someone else does the work. Instead of spending hours researching and analyzing market trends, a professional does it for you.
- Investment minimums exist. Since asset management services are only available to select clients, there is an investment minimum required to meet the management company’s wealth criteria. Wealth criteria vary by company and can range anywhere from $100,00 to $5 million for high net-worth individuals.
- Potential loss is possible. If the individual or company managing your assets doesn’t mitigate risk properly, it can result in losses for you.
- You may encounter significant fees. It may be freeing to have someone else do the research and work required to manage a portfolio but institutions charge high fees to do it. Some asset management firms charge a percentage on managed accounts and others charge a flat annual fee, which typically ranges from $5,000 to $10,000, depending on the size of your portfolio.
What is Wealth Management?
Wealth management is a financial planning service that helps you make the most of your wealth and protect it. A personal wealth manager works with you to coordinate your investments and finances and provides a comprehensive plan for your current or future needs. Personal wealth managers consider all your assets and investments, show you how to invest and guide you in ways to leverage your money. Asset managers help you identify risks and potential gains, teach you what you can expect from different types of assets and show you how different types of assets can be grown.
- You’ll get a comprehensive plan. Your wealth manager will help you create a comprehensive financial strategy, make strategic decisions and prioritize financial goals over time.
- It’s relationship-based. Your wealth manager continually thinks of you and your finances and works with you to navigate the market.
- You can benefit from personalized services. You get individualized services tailored to your financial goals.
- You’ll have to have a lot of trust in your wealth manager. Since your individual wealth manager handles everything, you have to be able to trust someone else with your money instead of managing it yourself.
- There’s always a risk of loss. There are risks anytime you invest — no matter what your investments are. You’ll need to assess your risk comfort with your wealth manager.
- High costs are involved. Many wealth managers charge an annual fee based on your portfolio’s size. Fees are typically determined according to a sliding scale, with an average rate of around 1% of your assets under management (AUM).
Wealth and Asset Managers vs. Financial Advisors
Several financial professionals offer consulting services and investment advice. How can you tell which one is right for you? Great question.
Wealth and Asset Managers
Wealth and asset managers offer individualized consulting and investment services for affluent individuals and corporations. An asset manager’s primary job is to help you determine which investments you should make, or avoid, whereas a wealth manager is responsible for providing comprehensive consulting advice on lots of financial topics.
You can expect these services when you work with an asset or wealth manager:
- Managing your money and investments
- Coming up with strategies for growing your wealth
- Offering investment advice based on vigorous research
- Organizing tactical plans to avoid or mitigate losses
Wealth management professionals may also coordinate services among different experts on your behalf, such as lawyers or accountants.
A financial advisor is any financial professional that helps you manage your accounts and investments. Advisors work with clients from a range of financial backgrounds and provide tailored advice to meet your financial goals. They typically specialize in a particular area within the financial industry. Depending on their area of specialization, advisors may hold a series of licenses overseen by the Financial Industry Regulatory Authority (FINRA).
Financial planners offer similar services to wealth managers. Wealth managers provide comprehensive consultations for a range of financial services and will also allow you to purchase services on a need-by-need basis. For example, if you need help planning for retirement, a financial planner will assist you with that specific need.
As you select a financial advisor, keep in mind that advisors come from a variety of financial backgrounds — so find out whether he or she is a fiduciary. A fiduciary is a financial advisor legally obligated to act in your best interest by the Securities and Exchange Commission (SEC). Clarify your financial goals and come up with a list of questions that will help you determine whether these services are a good fit for your financial needs.
Is an Asset or Wealth Manager Better for Me?
Now that you’ve determined that your assets are significant enough to require help from an asset or wealth manager, how do you decide which professional will fit your needs? First, you must determine what your financial needs are and define your financial goals.
If you’re looking to grow your wealth, protect it in the future and plan for your family’s current and future needs, working with a wealth management professional could be right for you. Wealth managers offer a holistic approach to financial planning by coordinating all the services needed to manage your money and plan for your needs. They provide inclusive financial advice across the financial industry and personally oversee all aspects of your finances. Make sure you have a wealth manager you trust — it’s crucial for successfully building and maintaining your finances.
If you want more targeted services to manage your assets and grow your investments, work with an asset manager. An asset manager’s goal is to maximize portfolio growth and minimize risk. Advisors conduct rigorous market research to inform their investment decisions. They often work within a financial institution and may utilize 3rd-party services as part of their investment strategy. Advisors typically offer higher transparency than wealth managers but you may not get the same degree of personal relationship that you have when you work with a wealth manager.
How to Find Wealth and Asset Managers
You've been thinking about reaching out to a wealth or asset manager for help. This brings up 2 important questions: How do you find an advisor? How do you know if he or she is a good fit for your financial needs?
1. Find an Advisor.
- Ask friends or family for referrals.
- Reach out to professional organizations such as the National Association of Personal Financial Advisors (NAPFA) or the Accredited Financial Counselor website.
- Check out an online resource like SmartAsset, which offers a free tool to match you with a financial advisor in your area.
2. Select an Advisor.
- Consider price and value. Think about what you’re paying and the services you’ll receive. You want to make sure that you’re getting the services you need.
- Check credentials and experience. Ask your potential advisor about his or her qualifications and experience. Pay attention to licenses and prior history with clients from similar financial backgrounds as yours. Find out whether your advisor is a certified financial planner (CFP), which means he or she has passed rigorous tests, can demonstrate work experience and is beholden to the CFP’s Board of Standards code of professional conduct.
- What’s your advisor’s ideal client? Ask your potential advisor to describe his or her ideal client. If the description doesn’t match your needs or portfolio, then you probably aren’t the best match for each other.
- How is your advisor paid? Some managers charge a set rate based on your portfolio size, whereas others charge a commission. You want someone who is committed to growing your portfolio versus earning extra money.
- Consider personality. If you work with a wealth manager, it’s critical that your personalities don’t conflict because your manager will be the sole individual responsible for managing your finances. You want someone who will be frank and honest with you but also be someone you can trust and confide in.
Find the Best Manager for Your Needs
Asset managers and wealth managers can both offer individualized services to help you with those big money questions. Before you trust someone to handle your finances or portfolio, make sure you’ve determined what your financial goals are and do research so you know the type of money manager that’s best for you.