Understanding the Process of Wealth Management

Wealth, which is your money and other valuable assets, needs proper management to grow and maintain its value.

Wealth management is about making important choices about your wealth to fulfill your financial goals. This process provides several services in investment, tax, estate, and retirement. It may or may not involve a wealth manager who should be certified.

Here is more information about the wealth management process and the fundamentals you need to use it.

Wealth Management Explained

Wealth management is an investment advisory. It consists of a range of financial services aimed at meeting the client’s financial needs and goals.

You, the client, receive top-tier, tailored services in the field of investment management, financial planning, tax advice, estate planning, and even legal support. That’s because wealth management focuses on helping you have financial security, growth, and wealth protection.

A certified wealth manager will be assigned to you, serving as your guide throughout the process. Wealth managers are licensed experts who can provide the financial services mentioned above and insurance sales.

Wealth managers’ main job is to ensure that clients have growth and sustainable wealth in the long run.

Here’s more information about the services that wealth management firms usually provide:

  • Investment Management

Wealth managers help clients create an investment strategy fitting their risk tolerance and financial goals. In addition, if your manager turns out to be a qualified investment advisor, they can provide you services in investment selection and management. However, note that you must pay a fee every year.

  • Financial Planning

Wealth managers can offer expertise in making a financial plan that covers saving, investing, and spending goals. They can also help you prepare for other important life events like retirement and college. You can reassess your plan from time to time as your financial situation or position changes.

  • Tax Advice

Wealth managers can provide the professional help you need to sort your finances in a manner that reduces tax liabilities, allowing you to preserve more of your wealth. Additionally, this type of service is more important if you have a business or several income streams.

  • Estate Planning

Wealth managers have also been trained to provide appropriate advice on estate planning which involves conserving and controlling the distribution of a client’s assets after they pass. This service can include creating a will or trust and choosing beneficiaries.

Private wealth managers can also provide the services above, although they usually work for high-net-worth individuals (HNWIs), affluent families, or accredited investors holding assets worth millions.

4 Common Wealth Management Strategies

Wealth managers use different strategies for different industries. But in the investment industry, there are four that they widely used.

Diversification: A risk management strategy that requires investors to fill their portfolios with different assets to curb the losses and impact on certain assets.

Asset Allocation: The process of choosing which asset category you should put your money into. This strategy balances the risk and reward by dividing your investments among assets such as stocks, bonds, and cash.

Rebalancing: Refers to the process of adjusting the weightings of the different assets in your investment portfolio to keep the risk and reward at their original levels when there’s a change in the market.

Tax-Loss Harvesting: This is a strategy for investors looking to reduce capital gains taxes. Tax-loss harvesting is when you sell some losing securities and then invest in similar securities. By selling, you lessen the tax liabilities on the gains generated by your other investments.

Wealth managers only have a handful of strategies that they can use to help you fulfill your financial goals. The answer to the question of which strategy should be used to manage your wealth will be based on your current situation.

Managing your personal wealth is crucial. So whatever wealth management strategy you choose, make sure you make that choice based on your needs and goals.

Choosing the Right Wealth Manager

In selecting a wealth manager, it’s vital that you do some research about matters including his license, reputation, and credibility. Finding out about those things is critical since they prove the manager’s ability to provide quality guidance to meet your needs.

For example, you can check if the wealth manager has certifications as a financial planner (CFP), an investment management analyst (CIMA), or a private wealth advisor (CPWA).

Moreover, before you team up with a financial advisor, make sure that you’re comfortable working with them and confident in their abilities. Remember that they will oversee your money and investments; trust is crucial in this business relationship.

Determining Whether You Need a Wealth Manager

The decision to work with a wealth manager comes down to your financial situation, goals, and financial knowledge.

If there are certain financial matters that you still have not figured out on your own, or you have needs that could use an expert’s opinion, you can seek assistance from a wealth manager.

On the other hand, if you’re sure about your goals and are already well-informed about the products/services and strategies that work for your wealth, you’re likely to do all right without a wealth manager.

In addition, you could get a second opinion about whether you should use a wealth manager to help with your financial needs from other advisors, like your accountant or attorney.

Other Options Beside Wealth Management

Getting help from a wealth manager will not be necessary if you’re doing just fine managing your money on your own. However, if you think a professional’s input would be beneficial but you’re unable to find the right wealth manager, there are alternatives to them.

Using a Robo-advisor is one option you can try. Robo-advisors are like digital, automated wealth managers that use strategies set by wealth management firms. Moreover, they automatically buy or sell investments based on the strategy.

With a Robo-advisor, you can manage your finances and investments with a predetermined strategy. Plus, they’re a good option if you don’t yet have the time or experience to manage your own money efficiently.

Index funds would be the second alternative. Index funds reflect the performances of specific market indexes. They are investment vehicles with a pretty straightforward and low-cost investment process. Furthermore, investing in one of them would instantly diversify your portfolio.

Usually, the diversification of index funds covers a cross-section of the stock market.

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