As overall wealth has grown in the U.S. and people become more proactive in making financial decisions, the field of private wealth management has grown, too.
Similar to traditional wealth managers, these advisors provide investment advice and help manage the financial affairs of their clients, who tend to be high-net-worth individuals (HNWI) or accredited investors with assets in the millions.
Although the term can be used to describe portfolio managers and independent advisors who manage HNWIs, private wealth management is also sometimes a subdivision within banks or other financial institutions that provide similar financial services.
What Private Wealth Managers Do
A private wealth manager may have experience in areas like investment banking, financial planning and accounting, and they use those tools to help clients manage their money to reach their financial goals and protect their wealth. They provide objective advice and guidance and offer personalized financial plans that take into account their clients’ unique circumstances.
They may also provide services like cash management, estate planning and tax advice. Some even help arrange loans and other financial services.
Private wealth managers can be employed by large financial institutions to assist key clients, or they may work independently as a boutique firm. Either way, they usually provide ongoing support and advice as their clients’ needs change over time.
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Benefits of Working with a Private Wealth Manager
Some benefits of working with a private wealth manager include:
- Receiving objective advice and guidance on how to grow and protect your wealth (depending on the company your private wealth manager works for, they usually sell both proprietary and nonproprietary investment products and services)
- Getting a personalized financial plan that takes into account your unique circumstances and goals
- Having someone to provide ongoing support and advice as your needs change over time
- Access to a team of professionals with experience in investment banking, financial planning and accounting
- Help with additional financial services that people tend to put off or find daunting, like estate planning
- Potentially saving money on taxes
Is Private Wealth Management Right for You?
Private wealth management may be a good fit if you:
- Are a high-net-worth individual
- Don’t have the time or expertise to manage your own finances and are looking for comprehensive financial planning and guidance
- Want someone to provide ongoing support and advice
- Feel comfortable trusting someone with your financial affairs
- Can pay the often high fees associated with service
There can be a lot of benefits to working with a private wealth manager, but it’s not for everyone.
Private wealth managers typically require clients to be HNWIs, and using one requires sharing a lot of financial information that some people prefer to keep private. In these cases, it may be better to find a local financial advisor who can be consulted on an hourly basis to answer specific questions and provide insights when needed.
Related: Find A Financial Advisor In 3 minutes
How Much Money Do You Need for Wealth Management?
The amount of money needed to work with a private wealth manager varies by firm and manager. It’s typical, however, for firms to require a minimum of $2 to $5 million in investable assets.
In some cases, private wealth managers may instead require a minimum annual fee in order to use their services. This fee is usually a percentage of the assets under management (AUM) but can also be hourly or project-based.
Types of Private Wealth Managers
Private wealth managers may have different licensing and certifications—like being a Certified Private Wealth Advisor or a Certified Private Wealth Analyst.
They also typically fall into one of two groups: those that are independent and those that are employed by a bank or other financial institution. Independent wealth managers are not affiliated with any specific banks or financial institutions but instead are often employed by small or midsize securities firms.
Professionals who work in wealth management may also have specialties that include accounting, banking, financial analysis, alternative investments, securities and other niches.
The two main types of private wealth managers include:
Independent Private Wealth Managers
Independent private wealth managers are individuals employed with firms not affiliated with any banks or financial institutions. The main draw to this type of private wealth manager is that they are typically small, boutique firms that can offer a more personalized service.
Because of this, these managers generally are free to choose from a wide range of investment products and strategies for their clients, but they may lack access to quick lending and other services available through banks.
Bank-affiliated Private Wealth Managers
Bank-affiliated private wealth managers are professionals associated with or employed directly by large banks or other financial institutions. These tend to be large firms with a global reach, with private wealth management acting as a single department within the bank. However, as part of a bank-affiliated service, these managers tend to only provide products and services that are available through the bank.
How Much Does Private Wealth Management Cost?
Most private wealth management firms charge a percentage of the assets they manage for a client. These fees usually range from 1% to 3% and may be tiered based on account size. Some firms also charge annual fees or may charge hourly or other fees for specific services they provide.
While private wealth management fees can be high, for HNW individuals, these services can provide a more personalized and tailored approach to investing than what is available from traditional investment vehicles.
Related: Find A Financial Advisor In 3 minutes
Private Wealth Management vs. Financial Planning
A private wealth manager is a professional who helps HNW clients manage their money and grow and protect their wealth over time. They also usually provide additional services like tax and accounting services, and estate and legal planning.
Financial planners are another type of financial professional who has experience in investment, retirement and tax planning. These professionals usually work with a wide array of clients to create comprehensive financial plans that take into account their clients’ unique circumstances and goals.
Financial planners don’t have to be bank-affiliated, although you may also find certified financial planners (CFPs) who are employed at banks, and they often have significantly lower minimums for getting started.
On the other hand, CFPs may not offer the full array of services traditionally offered by private wealth managers. Still, for people not in the HNWI category, a financial planner can certainly help manage and grow their money.
Tips for Selecting a Private Wealth Manager
If you’re trying to decide on a private wealth manager to work with, consider the following:
- Make sure the manager has experience in the areas you need help with, including things like investment banking, financial planning and accounting
- Inquire into how they charge, and consider if the fees are fair for the services you need
- Ask if the products and services they offer are proprietary or nonproprietary
- Try to find a wealth manager who has experience working with clients who have wealth and goals similar to you
Besides these considerations, make sure you feel comfortable with the firm and the advisor you’ll be working with. This person is going to have access to your personal information, and following their advice may have significant long-term impacts on your finances. As such, it’s essential to find someone you trust.
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