Wealth management advisors are often hired by well-to-do clients that are looking to maximize their wealth and distribute it fairly near the end of their time on Earth. They can handle all aspects of financial management. This article is a quick guide to the tasks completed by a typical wealth advisor and some of the differences between this field and traditional financial advising.
Take a Holistic Approach
Unlike a financial advisor, a wealth management advisor takes a holistic approach to the handling of their client’s money. Instead of being paid per service they offer, wealth managers are paid a set fee for all the management duties they complete. This fee is usually relative to the amount of money that is under management. They look at the bigger picture, working with their client to develop a multi-pronged approach to securing and growing their assets. The benefit of hiring a wealth manager instead of a more specialized financial advisor is that they tend to take on more of the workload and cover more ground when it comes to handling all aspects of a person’s wealth.
Wealth managers act as brokers for their clients. They use their knowledge of financial markets to make wise investments using their clients’ capital. This does mean that people hiring wealth managers must be extremely trusting of their new financial custodians.
To decide how the money will be invested, a wealth management advisor will create a risk profile for their clients. This profile sums up the degree of risk a person is willing to take. It also lists assets according to their risk level and potential for increase after investment. They will then consult with their client to ascertain just how much risk they are willing to take to improve their financial position. Many people choose to take a low-risk approach in which assets are invested into surefire stocks and bonds.
Wealthy clients are often keen to plan their finances to avoid paying vast sums of money in taxes. All good people are willing to contribute in some way to society if they have the means to do so, but wealthy people typically do not want to overpay income or inheritance tax. Wealth management advisors are well-equipped to help people distribute their assets and pay their taxes in a way that does not detrimentally impact their overall wealth or the amount they can pass on to their family members.
Estate planning is one of the key elements of wealth management. During the wealth planning process, all the assets owned by a client are collectively accounted for and formally earmarked for distribution after their passing. For wealthy clients, estate planning can be extremely complex due to the dispersed nature of some assets. Older clients often seek to plan their estate in such a way that their descendants maintain a degree of generational wealth. Hiring a wealth management advisor can reduce the stress that someone might feel about their future finances.