What does a wealth manager do?
If you’ve got a high-paying job, a large investment portfolio or you’ve received a substantial inheritance, a wealth manager can help you make the most of your money. But what exactly do wealth managers do, how much money do you need to use one and what are the pros and cons? Find out in this article.
What exactly do wealth managers do?
Wealth managers are a type of financial advisor. They tend to work with clients who already have a lot of money, offering them services such as portfolio management, estate, retirement and tax planning, and coaching.
Learn more: Financial adviser vs wealth manager
How much money do I need to use a wealth manager?
There's no set minimum amount of money you need to work with a wealth manager, but the amount you have will impact what firm you may choose to work with and the type of services you want to use. Some wealth managers also have minimum salary requirements, but they’re usually more concerned about the amount of money you have to invest. Fee structures can vary from one wealth manager to another - they may charge a percentage of their clients’ managed portfolio - a.k.a ‘assets under management’ (AUM) - usually ranging from 0.25% to 2%. Some wealth managers might use a different pricing structure, charging hourly or by project.
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What are the advantages of wealth management?
Tax-efficiency. If you’ve used up your annual ISA allowance and you’ve reached the annual allowance for pensions, you may struggle to find tax-efficient places to keep your money. A wealth manager can help you make the most of your assets, while minimising income tax, capital gains tax and inheritance tax.
Financial planning. A good wealth manager will do more than invest your money. When you first start working together, they’ll ask you questions about your income, expenses, and plans for the future. They’ll ask you about your career, family and even your hobbies so that they can create a personalised financial plan just for you.
Coaching and support. Some wealth managers offer coaching services too. They’ll help you explore your relationship with money, attitude to risk, and what matters most to you in life. For example, if you’re concerned about climate change, your wealth manager can show you how to invest sustainably and use your money in line with your values.
Peace of mind. Managing your money can be stressful, even if you have a lot of it. A wealth manager can take some of your financial responsibilities off your hands, giving you confidence, reassurance and peace of mind.
What are the disadvantages of wealth management?
Minimum wealth requirements. Some wealth managers will only work with clients who have a certain amount in savings and investments. Thankfully, there are plenty of financial advisors who’ll work with clients with much smaller portfolios, so you don’t necessarily have to manage your finances alone.
Fees. Wealth management fees of 0.25 to 2% may seem small, but they can have a significant impact on the growth of your portfolio over time.
Other professionals may meet your needs. If your concerns are mortgage-related, you might not need a wealth manager. Our award-winning team of mortgage brokers may be able to help instead.
Is it worth paying a wealth manager?
It may be worth paying a wealth manager if you have a large amount of money to invest. You could of course manage your investments yourself, spreading your money across ISAs, pensions and Buy to Let properties for example. You could compare life insurance policies and mortgages online, and even write your own will. The money you don’t spend on wealth management fees can be saved and invested, potentially resulting in a bigger portfolio over time than if you hired a professional.
However, your portfolio may grow faster and more tax-efficiently with the help of a specialist financial advisor. Wealth managers have extensive knowledge, expertise and qualifications. They’re also regulated by the Financial Conduct Authority, meaning they’re held to professional standards and must abide by certain rules and regulations.
Using a wealth manager could also save you time, energy and stress. You won’t need to keep up to date with the stock market, regulatory changes, or government budget announcements. Your wealth manager will stay on top of your finances for you, while you focus on your work, family and social life. Another option is to manage your own portfolio and get financial advice when you need it. This option may be more cost-effective, particularly if you’re an experienced investor.
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