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What Wealth Management Is (And What It Should Be)

By Dan Caplinger - Feb 19, 2016 at 1:40PM

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Go beyond the financial jargon to get the help you need.

Wealth management isn't just about counting your money. Image: Flickr user tao_zhyn.

Financial institutions are notorious for couching the advice they give to clients in jargon, and many mainstream firms have introduced of the concept of wealth management as a marketing ploy to give their investment-advice businesses a more attractive title. Yet wealth management goes well beyond what most financial professionals are able to deliver, and what it should be is a complete picture of not just managing your investments but also other areas in which finances play a key role.

How most financial institutions think of wealth management
To many companies, wealth management is simply a term that sounds good. One Wall Street firm refers to its private wealth management services as a subset of its investment management arm that "work[s] closely with high-net-worth individuals ... to develop wealth and investment management strategies." It then "complement[s] these services with robust execution capabilities and attentive client service." The firm only peripherally refers to introducing clients to its "broader network and resources" without specifying exactly what might be involved.

Some financial institutions give at least some lip service to the idea that wealth management is more than just managing investments. Another Wall Street company refers to several aspects of wealth management, including not just investment planning and management but also estate planning and wealth-transfer strategies. Access to capital through lending can help clients that have business or personal credit needs, and specialists in dealing with social and family dynamics that wealthy clients have to face offer a more personal touch to the service.

Nevertheless, the level of attention that customers truly need in order to manage their wealth is generally available only to those with extremely high net worth. Others might work through a division claiming to be related to wealth management, but the services they have access to generally more closely resemble what you'd get at any investment-management firm.

What wealth management should be
Ideally, financial institutions that use the wealth management label should commit to providing actual wealth management services. That goes well beyond simply handling investments.

First, the key to ensuring that you'll have access to true wealth-management services comes from looking at the credentials that a financial company's professionals have. Certified financial planners have training not just in investments but in a wide range of other money-related disciplines, ranging from retirement planning and insurance needs to income tax management, estate planning, and general principles of economics and finance. Strong wealth management teams include attorneys, accountants, and other specialists in particular issues to handle the many concerns that inevitably arise in handling wealth.

Second, the best wealth-management professionals focus not merely on maximizing investment returns. There's a constant tug of war between a person's financial needs and nonfinancial aspirations, and aligning your investment strategy with all aspects of your life requires finesse that many financial firms have trouble understanding. Put another way, investments are a tool that good wealth managers use as part of a broader strategy to get clients to where they want to be, but the investments aren't the end in themselves but rather the means to achieve those client goals.

Finally, it's critical to understand fully how wealth-management companies earn their compensation. At some firms, the wealth management label is just a license to charge inflated levels of fees in a similar framework to what they charge for pure investment management. Better wealth managers acknowledge the value of all the services they provide, and often, their clients will willingly pay additional expenses for specialists both within and outside the firm in order to get the best advice they can find.

Get what you need
Despite what the name implies, wealth management isn't just something for wealthy people. Everyone needs to find ways to balance handling their finances with the passions they want to pursue in life. The best wealth managers can help their clients put together a complete picture of what they want to achieve financially, as well as tying it to nonfinancial issues that are nevertheless critical to helping those clients live the lives they want to lead. As you consider the many companies that purport to offer comprehensive wealth management services to their clients, be sure to keep these thoughts in mind and don't compromise in your ultimate selection until you get exactly the mix of services that you want.

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