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According to FINRA, the regulatory agency that licenses financial advisors, the United States has over 663,000 financial advisors.¹ Of these, statistically speaking, only 6.6% practice actual wealth management.²

What then is Wealth Management? And what do wealth managers do differently from other financial advisors? What differentiates these 6.6% from the other 93.4%?

According to the experts who study such things, wealth managers include the following in their financial planning practice:

  1. Wealth Manager’s approach is collaborative.
  2. Wealth Managers provide customized strategies to client’s individualized needs beyond simply investment consulting.
  3. Their advice, including investment management, is ongoing.

Here is a formula for wealth management as we define it:

Investment Consulting

Nearly all financial advisors perform Investment Consulting. Investment Consulting is the primary function of a Financial Advisor, so this is appropriate. Investment Consulting refers to the act of providing investments and perhaps asset allocation advice. This is the most important portion of a financial advisor’s job.

Sometimes financial advisors perform ongoing investment consulting, sometimes they provide access to investments to clients on a one time basis. Investment Consulting may be customized, or it could be a presentation of the Financial Advisor’s employer’s investment offerings. It may or may not be collaborative.

Advanced Planning

Advanced Planning is comprised of four essential pieces:

Wealth enhancement principally involves tax mitigation and cash flow planning. For example, a true wealth manager will communicate regularly with your tax preparer, both during tax season and prior to year end, with the intent to minimize income and other taxes.

Mitigating Risk, legal structures, transferring risk to insurance companies. Investors do not want their assets being unfairly taken.

Transferring wealth to heirs, whether family or otherwise.

Charitable Planning

Maximizing charitable gifts and intent.

Relationship Management

Wealth Managers employ a clear and compelling vision of how they keep their clients informed as to the state of the client’s finances.

Importantly, wealth managers also communicate regularly with the client’s estate planning attorney, tax preparer, private fiduciary, insurance agent and other professionals. The importance of coordinating the efforts of all the client’s professionals cannot be overemphasized.

Finally, wealth managers maintain their own network of professionals who provide support and insight into various financial challenges.

² CEG Worldwide