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What is Private Wealth Management?

Private wealth management is an investment advisory practice focused on serving the unique needs of wealthy individuals. The practice incorporates a wide range of services, including financial planning and investment management, to manage significant amounts of wealth in a comprehensive fashion. Private wealth managers at small boutique firms and big-name firms like Goldman Sachs help high-net-worth individuals, couples, families and small foundations to grow and protect their assets and plan for the future. So what distinguishes private wealth management from other financial services? Let’s take a closer look.

What Private Wealth Managers Do

Private wealth managers offer a variety of financial planning and investment advisory services. They provide these services specifically to affluent investors to help them manage their wealth and achieve their financial goals. Often, private wealth managers provide services that apply particularly to wealthy individuals and families. This may include setting up trusts and foundations, or managing planned giving to minimize the estate tax burden on heirs. Often, private wealth managers will coordinate with the client’s attorney and accountants to ensure an aligned, holistic approach.

These financial professionals focus on comprehensively managing a person’s financial situation. As such, they can offer a wide range of services, including:

  • Financial planning
  • Investment advice and management
  • Tax services
  • Retirement planning
  • Social Security benefits planning
  • Estate planning
  • Charitable giving
  • Philanthropic planning
  • Risk management

When you begin working with a private wealth manager, you’ll likely meet to discuss your goals, both financial and personal. Your private wealth manager will also take a careful look at your entire financial life as it currently stands. Your private wealth manager will take all of this information into account for your financial plan and investment strategy.

Private Wealth Management vs. Financial Planning

What is Private Wealth Management?

There is a lot of overlap between private wealth management and financial planning. Both financial services are focused on analyzing a person’s current financial situation and planning for the future. Private wealth management and financial planning both may cover areas like retirement planning, tax planning and estate planning.

However, while financial planning is for all levels of investors, private wealth management is designed to meet the needs of the wealthy. Everyone needs to get ready for retirement and get his or her estate in order. Affluent individuals and families tend to have more complex and extensive needs though, which necessitate greater financial oversight and more active management. Wealthy individuals also tend to have unique needs in areas like income tax planning and trust creation that private wealth management addresses.

The other key difference between private wealth management vs. financial planning is in the investment services that each financial practice provides. A financial planner may create an investment plan for a client. A private wealth manager, however, would then implement that plan and manage the client’s portfolio. Essentially, private wealth managers can provide the services of both a financial planner and an investment advisor, specifically to affluent individuals.

Private Wealth Management Financial Planning
Typical Clients Geared toward the wealthy Open to all levels of investors
Services Offered Provides a range of financial planning services as well as investment advice and management Focused on planning, not necessarily investing or portfolio management

How to Find a Private Wealth Manager

If private wealth management sounds like the right financial service for your needs, there are a few ways to find a qualified private wealth manager. Large financial institutions, like Morgan Stanley and UBS, and independent financial advisor firms offer private wealth management. You’ll need to consider whether you’d rather work with a big company that may be able to also provide banking and other financial services, or if you’d prefer an independent firm with a more personalized feel.

To ensure you find a financial professional who is qualified to manage significant amounts of wealth, another thing to consider is certifications. There is only one professional certification specific to private wealth management: the certified private wealth advisor (CPWA). This certification prepares advisors to provide comprehensive attention to the needs of clients with a net worth of at least $5 million. Two other highly respected certifications, the certified financial planner (CFP) and chartered financial analyst (CFA), cover more generalized financial planning. However, they are still valuable in the wealth management field. You can search professional databases to locate a certified financial advisor in your area.

Word of mouth is another popular way to find a financial professional to work with. However, especially in the instance of a private wealth manager, it’s key to get recommendations from people with similarly significant levels of wealth and complex financial needs. You’ll want to find a private wealth manager who typically serves clients in financial situations similar to yours and who can provide the services you need.

Last but not least, a good way to find a financial professional who meets your needs is to use a financial advisor matching tool like SmartAsset’s. This service pairs you with up to three advisors in your area based on your financial situation and needs.

Do You Need to Be Wealthy to Work with a Private Wealth Manager?

The short answer: yes. Private wealth management is specifically geared toward those who have a significant amount of wealth. The practice is focused on addressing the challenges and management hurdles that come with having a high net worth. Certified private wealth advisors, for instance, are specifically trained to work with individuals who have a minimum net worth of $5 million.

However, you can get similarly comprehensive services even if you don’t have a high net worth. More and more firms are beginning to offer wealth management services to lower level investors as well. Wealth management similarly offers a blend of financial planning and investment advisory services designed to holistically address an individual’s entire financial situation. Still, there’s a key difference between this service and private wealth management, as it’s not geared towards the wealthy.

How Much Does Private Wealth Management Cost?

Private wealth management firms typically charge clients based on a percentage of assets under management. Generally, firms’ fee schedules have graduated rates, meaning that your rate will be lower the more assets you have under management. Goldman Sachs, for example, charges private wealth management clients who have $10 million under management will at rate of 1.75%. Clients with more than $500 million will be charged at a rate of 0.80% of assets under management. While asset-based fees are most common, firms may also charge a fixed fee or a blend of a couple different fee types.

It’s worth noting that asset-based fees don’t necessarily cover the cost of everything. Clients may also end up paying for additional services, as well as fund fees and other underlying investment expenses. That’s why it’s key to ask a financial professional questions about his or her rates and what those rates cover before you begin working together.

The Bottom Line

What is Private Wealth Management?

Private wealth management is a comprehensive financial practice. It combines financial planning and investment management to holistically serve the unique needs of affluent individuals and families. Rather than simply making investment recommendations or drafting a financial plan, private wealth managers look at a client’s entire financial life and provide a range of relevant services. Private wealth managers offer services such as portfolio management, tax planning, estate planning and philanthropic planning.

Whereas financial planning is offered to people in all financial situations, private wealth management is exclusively for the wealthy. Certified private wealth advisors, for example, specialize in serving people with a net worth of at least $5 million.

Tips for Choosing a Financial Advisor

  • Consider an advisor’s certifications. Advanced professional certifications can indicate an advisor’s area of expertise and level of education and experience. If you’re looking for a private wealth manager, a certified private wealth advisor (CPWA) may be a good choice. For those looking for tax-related advice, a certified public accountant (CPA) might suit your needs.
  • If you’re not sure where to look or you’re having trouble narrowing down your options, a financial advisor matching tool like SmartAsset’s can simplify your search. First, you’ll fill out a brief questionnaire about your financial situation and goals. Then, we’ll to pair you with up to three suitable advisors in your area. We’ve already vetted the advisors on our platform, and they don’t have any disclosures.

Photo credit: ©iStock.com/andresr, ©iStock.com/monkeybusinessimages, ©iStock.com/praetorianphoto

Becca Stanek, CEPF® Becca Stanek is a graduate of DePauw University. Becca is an experienced writer/editor who serves as a retirement expert for SmartAsset. She's passionate about helping people understand the sometimes daunting ins and outs of personal finance. Becca is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. Her work has also appeared at Time, The Week, Mic and The Washington Monthly. Becca grew up in the Midwest and now lives in New York City.
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