Wealth Management in the United States

Note: see more about financial advisor, financial planning, financial planner, financial consultant and wealth manager.

Wealth Managers

Wealth managers advise clients on how best to save, invest, and grow their money (see more about financial consulting or planning in this American legal encyclopedia). They can help you tackle a specific financial goal—such as readying yourself to buy a house—or give you a macro view of your money and the interplay of your various assets. Some specialize in retirement or estate planning, while some others consult on a range of financial matters.

Don’t confuse planners with stockbrokers — the market mavens people call to trade stocks. Wealth managers also differ from accountants who can help you lower your tax bill, insurance agents who might lure you in with complicated life insurance policies, or the person at your local Fidelity office urging you to buy mutual funds.

Anyone can hang out a shingle as a Wealth manager, but that doesn’t make that person an expert (see more about financial consulting or planning in this American legal encyclopedia). They may tack on an alphabet soup of letters after their names, but Certified Wealth manager is the most significant credential (see more about financial advisors in this American legal encyclopedia). A CFP has passed a rigorous test administered by a Certified Wealth manager Board of Standards about the specifics of personal finance (see more about financial consulting or planning in this American legal encyclopedia). CFPs must also commit to continuing education on financial matters and ethics classes to maintain their designation (see more about financial consulting or planning in this American legal encyclopedia). The CFP credential is a good sign that a prospective planner will give sound financial advice. Still, even those who pass the exam may come up short on skills and credibility (see more about financial advisors in this American legal encyclopedia). As with all things pertaining to your money, be meticulous in choosing the right planner.

How to Choose a Wealth Manager

Typically, Wealth managers earn their living either from commissions or by charging hourly or flat rates for their services (see more about financial advisors in this American legal encyclopedia). A commission is a fee paid whenever someone buys or sells a stock or other investment. For reasons we’ll explain later, you may want to avoid Wealth managers who rely on commissions for their income (see more about financial consulting or planning in this American legal encyclopedia). These advisers may not be the most unbiased source of advice if they profit from steering you into particular products.

A growing number of Wealth managers make money only when you pay them a fee for their counsel (see more about financial consulting or planning in this American legal encyclopedia). These independent Wealth managers don’t get a cut from life insurers or fund companies. You might pay them a flat fee, such as $1,500, for a financial plan (see more about financial consulting or planning in this American legal encyclopedia). Or you could pay an annual fee, often 1% of all the assets—investment, retirement, college-savings and other accounts—they’re minding for you (see more about financial consulting or planning in this American legal encyclopedia). Others charge by the hour, like lawyers.

You might also encounter Wealth managers who cater exclusively to the rich and refuse clients with less than $250,000 to invest (see more about financial consulting or planning in this American legal encyclopedia). Don’t take it personally—hugely successful planners would just prefer to deal with big accounts rather than beginner clients. You want a planner who’ll make the time to focus on your concerns and is interested in growing with you.

Should You Use a Wealth manager?

You can certainly go it alone when it comes to managing your money (see more about financial consulting or planning in this American legal encyclopedia). But you could also try to do it yourself when it comes to auto repair (see more about financial advisors in this American legal encyclopedia). In both areas, doing it yourself is a brilliant idea for some, and a flawed plan for many, many others. Mastering personal finance requires many hours of research and learning. For most, it’s not worth the time and ongoing effort.

As you get older, busier and (it is hoped) more wealthy, your financial goals – and options – get more complicated (see more about financial advisors in this American legal encyclopedia). A financial helper can save you time.

Wealth managers can also help you remain disciplined about your financial strategies (see more about financial consulting or planning in this American legal encyclopedia). They’ll make the moves for you or badger you until you make them yourself. Procrastination can cause all sorts of money problems or unrealized potential, so it pays to have someone riding you to stay on track.

We’re not suggesting that you ignore personal finance and turn over all your concerns to an adviser (see more about financial consulting or planning in this American legal encyclopedia). But even if you know the basics, it’s a comfort to know that you have someone keeping watch over your money.

It may sound crazy to give someone 1% of your annual assets to manage them, but you get a buffet of advice about almost anything related to personal finance (see more about financial consulting or planning in this American legal encyclopedia). The price becomes sensible when you consider that you’re paying to establish a comfortable retirement, save for your child’s college or choose the right mortgage when borrowing hundreds of thousands of dollars.

How to Find the Right Wealth manager

It’s best to go with a certified Wealth manager, which is an instant signal of credibility – but not a guarantee of same (see more about financial consulting or planning in this American legal encyclopedia). To start, ask people like you if they can recommend a planner (see more about financial advisors in this American legal encyclopedia). If you have kids, ask a colleague who also has children (see more about financial advisors in this American legal encyclopedia). If you’re single and just out of college, check with a friend in the same boat (see more about financial advisors in this American legal encyclopedia). If possible, you want to find a planner with successful experience advising clients in the same stage of life as you.

For more leads, check the National Association of Personal Financial Advisors (NAPFA) (see more about financial consulting or planning in this American legal encyclopedia). These planners are fee-only, which means their only revenue comes from their clients (see more about financial consulting or planning in this American legal encyclopedia). They accept no commissions at all and pledge to act in their clients’ best interests at all times (see more about financial advisors in this American legal encyclopedia). In many respects, NAPFA standards meet or surpass the requirements needed for a CFP credential.

Another good bet could be a planner in the Garrett Planning Network, a group of certified Wealth managers who all pledge to make themselves available for smaller projects for an hourly fee (see more about financial advisors in this American legal encyclopedia). All of the members of this network are CFPs or they’re actively working towards this designation (see more about financial advisors in this American legal encyclopedia). It may be that you just have a handful of questions, and someone here could help you without charging too much.

A few more tips for finding the best planner for the prospective client situation:

• Consider the planner’s pay structure. The prospective customore typically wants to avoid commission-based advisers. Planners who work on commission may have less than altruistic incentives to push a certain life insurance package or mutual fund if they’re getting a cut of that revenue.
• But fee-based advisers aren’t perfect (see more about financial advisors in this American legal encyclopedia). Advisers earning 1% of your annual assets might be disinclined to encourage you to liquidate your investments or buy a big house, even if those are the right moves at a particular point in your life, because their fee would shrink.
• If you’re starting out and don’t have a trove of assets, an planner who charges by the hour could be the best fit (see more about financial consulting or planning in this American legal encyclopedia). These planners are best for when your needs are fairly simple (see more about financial consulting or planning in this American legal encyclopedia). Typically, hourly planners are just building their practice, but that usually means they’ll take the care to get your finances right (see more about financial advisors in this American legal encyclopedia). After all, they’re relying on your recommendation to grow their business. Finally, many experienced advisers do hourly work because they enjoy working with younger clients who can only afford to hire someone at that rate.
• Look for a fiduciary. In short, this means the planner has pledged to act in a client’s best interests at all times (see more about financial advisors in this American legal encyclopedia). Investment professionals who aren’t fiduciaries are often held to a lesser standard, the so-called sustainability standard (see more about financial consulting or planning in this American legal encyclopedia). That means that anything they sell you merely has to be suitable for you, not necessarily ideal or in your best interest (see more about financial consulting or planning in this American legal encyclopedia). This point is critical, and should be a deal breaker if a prospective planner is not a fiduciary.
• Run a background check on your planner. Start with these two questions: Have you ever been convicted of a crime? Has any regulatory body or investment-industry group ever put you under investigation, even if you weren’t found guilty or responsible? Then ask for references of current clients whose goals and finances match yours.
• Check to ensure the credentials the person claims to have are current. Search them in internet, see who administers the designation, then call that administrator to verify that the credential is valid.
• Beware of market-beating brags. Warren Buffet outperforms the market averages (see more about financial consulting or planning in this American legal encyclopedia). There aren’t a lot of people like him (see more about financial advisors in this American legal encyclopedia). If you have an initial meeting with an adviser and you hear predictions of market-beating performance, get up and walk away. No one can safely make such guarantees, and anyone who’s trying may be taking risks that you don’t want to take.
• Asking someone whether they’ll beat the market is a pretty good litmus test for whether you want to work with them. What they should be promising is good advice across a range of issues, not just investments (see more about financial advisors in this American legal encyclopedia). And inside your portfolio, they should be asking you about how many risks you want to take, how long your time horizon is and bragging about their ability to help you achieve your goals while keeping you from losing your shirt when the economy or the markets sag.