What is Wealth Management and do you need it? – Forbes Advisor

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Your wealth, measured both in possessions and in money, must be managed in such a way that it grows or avoids losing value. Wealth management is the process of reviewing and making decisions about your wealth so that you can achieve your financial goals.

A wealth manager can have a number of certifications, but typically this person is a professional who provides financial advice and services to help you on your wealth management journey. Wealth management services may include investment, retirement, tax or estate planning.

Here’s what you need to know about wealth management before deciding if you need a wealth manager or to help you choose a business.

Understanding Wealth Management

Wealth management is the process of making decisions about your assets, sometimes with a wealth manager. This includes, but is not limited to, financial investments, tax planning, estate planning and other financial matters.

The goal of wealth management is to help you achieve financial security and to grow and protect your wealth.

A Wealth Manager is a certified professional who provides financial advice and services to clients who need help with wealth management. This is a licensed financial professional who generally provides a full range of services. These may include investment management, financial planning, insurance sales, tax advice and estate planning.

A wealth manager’s goal is to help clients grow and preserve their wealth over the long term.

Here are some of the most common services offered by wealth management companies:

  • Investment management. A wealth manager will work with you to develop an investment strategy that suits your goals and risk tolerance. If the manager is a licensed investment adviser, they may also select and manage investments on your behalf, often in exchange for an annual fee.
  • Financial planning. A wealth manager can help you develop a financial plan that includes saving, investing, and spending goals. The manager can also help you plan for retirement, save for college and other major life events. These plans may be reviewed periodically as your circumstances change.
  • Tax advice. A wealth manager can advise you on how to structure your finances to minimize your tax liability. This is especially important if you own your own business or have multiple sources of income.
  • Estate planning. A wealth manager can help you develop a plan for what will happen to your assets after you die. This may include creating a will or trust and named beneficiaries.

Private Wealth Managers offer the same types of services but for High Net Worth Individuals (HNWI) or Accredited Investors with multi-million assets.

Do you need wealth management?

The decision to hire a wealth manager depends on your financial situation and goals, as well as your financial expertise. If your goals are clear and confident in your ability to choose the products and strategies that will help you grow and protect your wealth, you may not need the help of a wealth manager.

However, if you have questions you can’t answer or have needs that could benefit from expert advice, a wealth manager could help you make informed decisions about your finances and guide you through everything. throughout the process.

Other advisors you work with regularly, such as your accountant or lawyer, may also be able to tell you if a wealth manager can help you meet your financial needs.

How to choose a wealth manager

When choosing a wealth manager, it’s important to find a reputable professional with the appropriate licenses and expertise to give you sound advice for your unique needs. For example, some certifications you might seek include Certified Investment Management Analyst (CIMA), Certified Private Wealth Adviser (CPWA), and Certified Financial Planner (CFP), among others.

Here are some factors to consider when interviewing wealth managers:

  • Reputation. Ask around for reviews of local companies, or search for an advisor through FINRA Brokercheck or the SEC’s Investment Advisor Public Disclosure Database to learn more about the reputations of different companies.
  • Clients. Make sure the advisor has experience working with clients in circumstances similar to yours.
  • Investment philosophy. The advisor you work with will suggest or choose strategies for your portfolio, so you’ll want to be okay with how they make their decisions.
  • Offerings. Confirm that they offer the specific products or services you need and ask if those products are proprietary or not.
  • Costs. You may be charged investment-related or specific advisory fees. Make sure you understand what they are and what products or services they are related to.

Before signing with an advisor, make sure it’s someone you’re comfortable with and trust. This person will be responsible for making decisions about your finances, so it’s important that you trust them. Meet with a few different wealth managers to get a better idea of ​​who is best for you.

Wealth Management Strategies

The strategies used by wealth managers vary from industry to industry. On the investment side, some of the most common strategies include:

  • Asset allocation. The process of dividing an investment portfolio between different asset classes, such as stocks and bonds.
  • Diversification. A risk management technique that involves investing in a variety of assets to minimize the impact of losses on a particular asset.
  • Rebalancing. The process of realigning a portfolio’s assets to maintain the original risk/reward ratio when things change.
  • Harvest at tax loss. A strategy used to minimize capital gains taxes by selling securities that have incurred losses and replacing them with similar investments.

These are just a few of the strategies wealth managers can use to help you achieve your investment goals. The specific strategies employed will depend on your unique situation.

Alternatives to Wealth Management

If you are comfortable managing your own finances, a wealth manager is not essential. Or, if you think you could use a little help but can’t find a manager you’re comfortable with or prefer not to involve another person in your finances, there are other options.

One way to manage your money according to a defined investment strategy, without relying on a wealth manager, is to use a robo-advisor. A robo-advisor is an automated trading system that has an investment strategy defined by a wealth management company, and periodically buys or sells securities automatically based on its specific strategy.

Robo-advisors can be a good option for people who want to manage their own finances but don’t have the time or knowledge to do so effectively.

Another option is to invest in index funds. Index funds are a publicly available type of investment that tracks specific market indices, such as the S&P 500. Index funds are a simple and inexpensive way to invest, usually with diversification across a representative sample of the stock market .

Managing your wealth is important, so whatever wealth management method you decide to adopt should be based on your individual needs and goals.

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