Wealth Management
As the saying goes, If you have to ask how much it is, you can’t afford it, and as a corollary to it elaborates, If you’re not sure whether you need wealth management, you probably don’t.
Truly affluent people are faced too squarely with the callous fact that wealth is a resource to be managed actively lest entropy and its various spawn – complacency, incompetence, benightedness, inflation, family strife – eat away at it, making large fortunes into small ones, the latter into misfortunes.
From time immemorial down to the present day, enough great cheese and winemaker’s cellars have decayed with mismanagement via rot that is anything but noble.
Too many tabloid tales of steel and railroad magnates have we read about these men of metal having the wheels stolen right off of their fortune’s locomotive by amoral associates, overprivileged progeny, rapacious relations.
Many a mass maker of cars and trucks has been blindsided – Model-T-boned by undriven children in executive roles, spun off the narrow and true by irresponsible borrowing and preventable tax consequences.
Plenty a tycoon, builder of cities and structures great, has seen the great edifice of the family business turn into little more than facade, the substance of stories gone up in the smoke of market machinations, malicious mismanagement, bridges too far.
Given this sad history, some of the wealthy out there – perhaps even those now casting sated eyes on these very lines – might manage to ask self, Do I need wealth management?, the answer to which – timorously at first, then with greater and greater temerity – just might be a resounding Yes!
Just what is wealth management?
Wealth management is widely understood to be a suite of services that aims to manage, multiply and protect wealth. This suite includes insurance, estate and tax planning, investment management and tax abatement strategies. Aiming at one-stop-shop status, certain firms also offer accounting and banking services to clients. To understand what, at root, a wealth manager must be, we tracked down the basic definition of financial planner, provided by the Certified Financial Planner Board of Standards: “financial planning involves looking at a client’s entire financial picture and advising them on how to achieve their short- and long-term financial goals.” This includes managing taxes and insurance as well as saving for education and planning for retirement. As adumbrated by the name of the organization above, financial planners have a professional certification, Certified Financial Planner (CFP) which has no counterpart among those who call themselves wealth managers. Hence, a solid beginning is to require that your future wealth manager have a past (and present) as a CFP.
Most candidates for wealth management services will have an existing relationship with a financial planner and a lawyer. If the job of managing your wealth has grown beyond these specialists’ ken, assuming that they are true professionals, they will recognize the magnitude of things, stepping back and nobly guiding you in finding specialists who can more comprehensively serve your needs.
Why I Might Need A Wealth Manager
Question: in what way would someone’s needs outstrip the abilities of a mere mortal financial planner? One way to outgrow your advisor would be to join the rarefied ranks of high net worth (HNW) individuals. Wealth management, then, may be seen as financial planning-plus for HNWs. The plus includes accounting, tax, trust and banking services, along with little extras like that cool San Pellegrino or Pinot Grigio or Pininfarina – well, you get the point – when the client visits the firm. Now, what is a HNW anyway? The Securities and Exchange Commission comes to the rescue with a definition: a high net worth individual is someone with over $750,000 in investable financial assets or a net worth in excess of $1.5 million. Once you have reached that comparative stratosphere and its attendant concerns as to how you should be protecting and growing your assets, consider yourself client material for a wealth manager.
Legacy
Another reason to take up with a manager of wealth is if you are trying to leave a financial legacy, which, with mandatory expiration of humans from earthly existence not yet a thing of the past, is a highly reasonable plan for using your earthly possessions to create wealth and happiness beyond your lifetime.
Legacy planning aims to include all forms of family wealth in a structured, tax-advantaged, mutually agreed upon vehicle, usually a trust of some sort, that ensures a thriving future for the people and causes you love. Family communication and education are prerequisites, and good wealth managers guide families through a personalized process that works for the specific goals they have. Each family has had its ups and downs, and can tell its own story of resilience and success. The resultant values need to be reflected in the DNA of any process or strategy for preserving family finances and using them for good, whether that good manifests as philanthropy or generation after generation of financially healthy people who are not defined by their money.
When choosing a wealth management team, steer clear of firms that practice the hard sell with promises of handily multiplying your assets. After all, what you are really looking for is a protective edge – against inflation, risk (industry, market, sovereign, currency et al) and ill-considered decisions made on the basis of insufficient information. At bottom, most people of true wealth are less interested in betting the farm to gain a far-off pasture and more invested in preserving and actuating what they have.
Not yet there
Now, let’s say all that HNW-individual stuff sounds swell, but you’re not yet there. Let's say that for the moment you’re still growing that grass and baling that hay and mucking those stalls – on your way to someday having your very own Grand Prix-level dressage barn, where every horse is a champion and every champion is a horse, of course. You’re not a high-net-worth guy or gal yet, but, hey – a penny for your dreams – I can tell that with your work ethic, when those prize pennies for those prize ponies start falling all over town, you’ll want to have your horse-themed umbrella – well – upside down.
The first thing you’ll want to do is hire a general financial advisor; a CFP will do nicely. A Certified Financial Planner certification is, after all, the bedrock for all wealth managers. And just because you’re into horses, the newest transportation trend c. 3000 BC, doesn’t mean you can’t make use of the latest technology of today. A robo advisor – you can name him after the champion gelding Valegro, if you like – can help you out in the meantime. For those who prefer to spend the lion’s share of their time tripling down on their strengths. i.e. concentrating on the work they do, as opposed to researching the financial markets and then making bets on stocks, going with a robo advisor may be just the ticket.