The management of personal wealth is a discipline that involves planning, growing, preserving, and protecting wealth, as well as passing it on to the next generation efficiently, as Peter d’Aguilar explains
Whether you view money as the route to happiness or the root of all evil, there’s no denying its necessity. According to the American showman Phineas Barnum, “money is a terrible master, but an excellent servant.” Pioneering car manufacturer Henry Ford stated, “money is like an arm or leg – use it or lose it.” An ancient proverb warns us that, ‘a fool and his money are easily parted.’
This is where wealth management comes in. Anyone lucky enough to have accumulated a reasonable sum of money – whether through inheritance, the sale of a business or property, a lottery windfall, or just plain hard graft – ought to consider seeking expert advice on how to invest their nest egg so that it’s secure and productive.
A wealth management consultant, or financial adviser, will offer guidance and recommendations on investment with the aim of preserving, protecting and growing a pot of money, while also helping to ensure that in due course financial assets are passed on tax-efficiently to the next of kin. Successful wealth management can involve a synergistic combination of disciplines – investment advice, estate planning, accounting, retirement provision, tax services, succession planning and family governance.
A good adviser will use a consultative process to learn their client’s financial circumstances, requirements and aspirations. They will then come up with a personalised strategy that draws upon a range of financial products and services, based on their present and projected financial situation, goals and risk tolerance.
Wealth management involves more than just investing money. It can encompass all parts of an individual’s financial life. Instead of attempting to integrate pieces of advice and various products from many different sources, wealth management offers a more integrated approach. A wealth manager coordinates the services needed to manage their client’s assets, and also creates a strategic plan for their current and future needs – this could cover diverse areas such as will and trust services, or business succession plans. After the client and adviser have developed and agreed the original plan, they will meet regularly to update goals, review and rebalance the portfolio and assess whether additional services are needed. In many cases, this becomes a business relationship that continues for the remainder of the client’s lifetime.
In certain instances, a wealth management adviser may have to coordinate input from outside financial experts, as well as the client’s own service professionals (for example, a solicitor or accountant). Some wealth managers also provide banking services or advice on philanthropic activities. Wealth management advisers directly employed by an investment firm may have more knowledge on investment strategy, whereas ones who work for a bank may focus on the management of trusts, credit options, estate planning or insurance – expertise varies from firm to firm.
Wealth management advisers generally charge an all-in-one fee for their services, based on a percentage of the amount of assets under management – on average around 1% per annum, though this can vary considerably. Advisers can charge for their services in several ways. Some work as fee-only advisers and charge an annual, hourly or flat fee. Some are paid through commission on the investments they sell. Others are remunerated through a combination of the two.
The first mention of wealth management dates back to the 1930s, although the discipline really started to gather momentum in the late 1980s; when banks and brokers began hosting seminars designed to demonstrate their investment skills to their most affluent clients. The global recession in the late 2000s prompted investors to scrutinise the management of their portfolios more closely, with the spotlight shining on the role of wealth management advisers. This has resulted in a move towards better communication and a more holistic relationship between advisers and their clients; embracing broader lifestyle issues such as career goals, working environment and patterns of expenditure.
As with any professional adviser, it is important to make sure that their specialisms fit your particular needs – so check credentials carefully. They must be regulated by the Financial Conduct Authority (FCA).