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It’s safe to say that from time to time, everyone could use some help managing their money. But while many people can get by with limited help, some can benefit from a hands-on approach.
People with high net worth – in the millions or approaching it – may want to work with an asset or wealth management company. We’ll help you determine the type of professional help that’s right for you.
What is Asset Management?
Asset management is a service whose objective is to make your money grow.
An asset manager focuses on your investments and may be called an investment adviser, financial adviser, registered investment adviser (RIA), robo-advisor, or even an investment broker.
Your asset manager may work alone or as part of a larger asset management firm. You don’t have to be rich to work with an asset manager, you just need to want to start or optimize your investment portfolio.
An asset manager may or may not be a fiduciary – a financial professional bound to keep their client’s best interests in mind – so be sure to check before signing up.
What is Wealth Management?
A wealth manager is a financial advisor who specializes in working with wealthy clients. They also offer advice on a variety of financial aspects beyond your physical assets. As your wealth grows, your finances become more complex, this is where a wealth manager can bring his tailor-made expertise.
Wealth management can focus on saving for retirement and tax planning, as well as insurance protection, estate planning and trust management. These professionals can also offer more services than the typical financial advisor to meet the complex needs of their clients.
A wealth manager is likely to be a fiduciary, but be sure to ask before signing.
Should I choose asset management or wealth management?
Wealth management companies typically work with wealthy individuals or families. You probably don’t need wealth management unless you already have a significant amount of money in investments or are ready to invest a large sum.
A wealth management service may require $250,000; $500,000; or at least $1 million in investments to become a client. Minimums may vary by wealth management firm and service specialty.
If you have a lower net worth but want to grow your money, it may be worth considering an asset manager rather than a wealth manager.
Choose an asset manager
When choosing an asset manager, check the manager or platform credentials (if using a robo-advisor). It is important to determine whether a manager applies a fitness standard or a fiduciary standard, the latter method being the most beneficial to you.
Beyond that, cost may be your most important factor. Some investors may save by using passive management options, while others may want a more personalized approach that could cost more.
Choose a wealth manager
Not all wealth management companies have the same strategy for every client. Depending on your situation, you may want to focus on growing your investments, optimizing your tax planning, or creating a succession plan if you own a business. These are all valid strategies, but your wealth manager’s expertise and tactics should match your goals and concerns.
If you’re considering working with a wealth manager, you’ll want to ask many of the same questions you would ask before hiring a financial professional. You may also want to find out about the person or firm’s wealth management experience and the exact services offered by their practice.
As with the decision to hire a financial expert, be sure to check professional references. You can view a person’s Certified Financial Planner (CFP) credentials through the CFP Council. Or you can use the Financial Industry Regulatory Authority (FINRA) BrokerCheck to find advisers registered with the United States Securities and Exchange Commission (SEC).
The XY Planning Network also offers the possibility of searching for financial advisers specializing in wealth management.
How much does it cost to hire an asset manager vs a wealth manager?
Asset management costs
The costs of hiring an asset manager can vary depending on the type of relationship you want. If you use a robo-advisor or work with a wealth manager who charges passive management fees for portfolios that rely heavily on index funds, you can expect to pay between 0.25% and 0.50% the value of your portfolio per year. These fees are often described as a percentage of assets under management (AUM).
If you choose active investment management, your fees will depend on who you hire and the investments in your portfolio, but you can generally expect to pay 1% of your portfolio in annual fees.
Additional fees, such as account fees ranging from $25 to $100 per year or brokerage fees of up to $50 per transaction, may apply.
Wealth management fees
Since a wealth manager manages a broader view of your finances, you can pay them a flat fee by the hour, year, or by type of service. Their fees may also depend on how much of your money they manage, similar to the percentages an asset management service would charge.
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