How and When Is Wealth Management Worth It?

Wealth management services are some of the most high-level and comprehensive financial services that exist. While financial planning services can help with individual financial matters, and asset management services typically deal with investments, wealth management can encompass every part of an individual’s finances from taxes to estate planning, to charitable giving and more. But should you pay for wealth management services? This will depend on your specific financial situation, so it’s important to make sure that it fits in with your overall financial plan and goals.

If you decide you want wealth management, SmartAsset’s free tool can help you find a financial advisor.

What Is Wealth Management?

Wealth management is a comprehensive financial service that not only offers clients investment advice, but also helps with a wide range of financial and financial-adjacent matters that affect different parts of a client’s financial life.

Wealth managers typically develop complex and holistic financial plans that detail information about investing, taxes, charitable giving, estate planning and any other relevant needs or goals. In turn, they typically manage your investments with an eye towards your long-term goals.

Wealth managers also help set, review and update goals, rebalance investment portfolios and assess whether clients need other services to protect their wealth. This could include managing charitable giving, tax liabilities and business plans.

Because of its comprehensive nature, wealth management is typically reserved for individuals who are at least above the high-net-worth threshold. This is generally seen as someone who has at least $750,000 in investable assets or a $1 million net worth.

Who Can Access Wealth Management Services?

Wealth management services often require higher minimum asset levels and may involve additional fees due to their comprehensive scope.

Wealth management services aren’t typically available for everyone. Due to the comprehensive nature of them, firms can require high minimums, such as $500,000 or $1 million. In fact, they may even charge additional fees to cover the costs of wealth management services, being that they’re comprehensive.

For reference, financial advisors at most firms typically charge fees based on a percentage of assets under management (AUM) for portfolio management services. These rates generally reside somewhere around 1% of AUM annually, though rates usually drop as you invest more with the firm. Managers can also charge clients in other ways, which can include hourly charges, fixed fees, commissions and performance-based fees.

While the specific amount you’ll pay for wealth management will vary significantly by firm, you’ll probably need at least $1 million. For example, Fidelity requires $10 million in investable assets for private wealth management services. However, it also has a simpler service with the firm has a lower minimum of $250,000.

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Pros and Cons of Wealth Management Services

Wealth management services can be a valuable resource for individuals looking to grow, protect, and manage their assets. However, like any financial solution, these services come with both advantages and drawbacks. Understanding the pros and cons of wealth management services can help you make an informed decision about whether they’re the right fit for your financial goals.

Pros of Wealth Management Services

Comprehensive financial planning: Wealth management services typically offer holistic financial planning, covering investments, retirement, tax strategies and estate planning. This all-in-one approach can simplify your financial life and ensure all aspects are working together.
Access to expert advice: Clients benefit from the expertise of seasoned financial professionals who can provide tailored advice. This guidance can help you navigate complex financial decisions and market fluctuations with greater confidence.
Personalized investment strategies: Wealth managers often create customized investment portfolios based on your risk tolerance, goals, and timeline. This personalization can help optimize returns while managing risk.
Time savings and convenience: Delegating financial management to professionals frees up your time and reduces the stress of handling investments and planning on your own. This is especially valuable for busy individuals or those with complex financial situations.

Cons of Wealth Management Services

High fees and minimums: Many wealth management firms charge significant fees and require high minimum investments, which may not be accessible for everyone. These costs can eat into your returns over time.
Potential conflicts of interest: Some advisors may be incentivized to recommend certain products or services that benefit them more than you. It’s important to understand how your advisor is compensated to avoid biased advice.
Limited control over investments: By entrusting your finances to a wealth manager, you may have less direct involvement in day-to-day investment decisions. This can be a drawback for those who prefer a hands-on approach.
Variable quality of service: Not all wealth management firms offer the same level of expertise or attention. Service quality can vary widely, so it’s crucial to research and choose a reputable provider.

In summary, wealth management services can offer significant benefits, especially for those seeking expert guidance and comprehensive planning. However, it’s important to weigh these advantages against the potential downsides, such as fees and reduced control, to determine if this approach aligns with your financial needs and preferences.

When Should You Consider Wealth Management?

Ultimately, whether wealth management and other financial planning services are worth it completely depends upon your specific financial situation. For example, are you looking to build an estate plan, plan for retirement and make investments all at once? Then the holistic nature of wealth management might be for you.

Let’s say you have $1 million in investable assets, you set up a trust for your children and grandchildren and you are the beneficiary of your parents’ estate. A wealth manager can help you invest your funds, provide trust and estate planning services and work with you on a financial plan to minimize taxes and maximize income.

Wealth management services generally benefit clients most as they acquire more wealth to invest or manage. But this isn’t a hard and fast rule. As we mentioned earlier, some firms may offer clients simplified services at lower minimums.

Additionally, it’s also worth noting that since wealth managers typically combine different strategies to protect client wealth, these comprehensive services could benefit you if you don’t have enough time or resources to manage all the aspects of your financial life. Of course, there is a fee for this hands-off approach. In other words, decide based on your own needs if you think a wealth manager is necessary.

Wealth Management vs. Financial Planning vs. Asset Management

Wealth management focuses on coordinating multiple areas of a person’s financial life under a single strategy. This typically includes investment management, tax planning, estate planning, retirement income planning, charitable giving and risk management. The emphasis is on integration across disciplines rather than solving one isolated financial issue.

Financial planning centers on building a structured roadmap for reaching specific goals. This can include retirement projections, budgeting, education funding, insurance analysis and cash-flow planning. A financial plan may or may not include ongoing investment management, depending on the advisor and service model.

Asset management is narrower in scope and primarily concerned with constructing and managing an investment portfolio. The focus is on asset allocation, security selection, rebalancing and performance monitoring. Taxes, estate planning and broader financial considerations are typically addressed only as they relate directly to investments.

The three services often overlap, but the depth differs. Financial planning provides the framework, asset management handles portfolio execution and wealth management combines both while adding coordination across taxes, estate strategies and other complex needs.

Cost structures also vary. Asset management is commonly priced as a percentage of assets under management. Financial planning may be charged as a flat fee, hourly fee or subscription. Wealth management is usually asset-based and reflects the bundled nature of the services.

Choosing among these options depends on scope rather than labels. Some households only require a financial plan. Others want professional portfolio management. Those with layered financial needs across investments, taxes and estate structures often gravitate toward wealth management.

Bottom Line

Wealth management offers coordinated financial expertise across investments, taxes, and estate planning for high-net-worth individuals.

Wealth managers bring specialized expertise to complex financial situations, but their services are typically geared toward high-net-worth individuals. Clients generally turn to wealth management when they need coordinated help across multiple areas, such as investment management, tax mitigation, estate planning, and charitable giving.

“All financial advisors do not provide the same services. Understanding what you need can help you identify which advisor may offer the right service, such as wealth management,” said Brandon Renfro, CFP®, RICP, EA.

Brandon Renfro, CFP®, RICP, EA, provided the quote used in this article. Please note that Brandon is not a participant in SmartAsset AMP, is not an employee of SmartAsset and has been compensated. The opinion voiced in the quote is for general information only and is not intended to provide specific advice or recommendations.

Wealth Management Tips

If you’re thinking about working with a wealth manager or a financial advisor, make sure you explore your options. Make sure you work with an advisor that can help you with your unique set of needs. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goal, get started now.
Wealth management isn’t for everyone. Plenty of people invest and manage their finances on their own. However, if you choose this path, it pays to be well prepared. SmartAsset has you covered on that front as well. Give our investment calculator a try and get started with smarter investing today.