Understanding the Role of a Wealth Manager: A Detailed Guide

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Key Takeaways:

Wealth managers are high-level professionals who offer comprehensive personal financial services. They assist you by providing expert investment advice, conducting research on your behalf, and strategically allocating your assets based on your specific investment goals, horizons, and risk appetite. Wealth managers usually work with high-net-worth and ultra-high-net-worth individuals.

Introduction

Imagine your wealth as a garden. It flourishes with careful planning, tending, and adaptation.

As all the world's wealth flourishes, so does the need for expert gardeners - wealth managers. These professionals offer services beyond simple banking advisory; they provide a life-long service, helping affluent individuals build and manage their assets. It's like having a financial co-pilot by your side, helping you navigate complex decisions and make informed investments based on your unique risk appetite, investment horizons, and financial goals.

Let’s understand why a wealth manager is an essential partner in your financial journey.

What Is Wealth Manager?

A wealth manager is a specialised financial advisor who offers wealth management services to high-net-worth and ultra-high-net-worth clients. Based on your investment needs and goals, a wealth manager offers you valuable advice and a range of additional services related to your financial life. Wealth managers may work individually, function as a small-scale business or even run large firms. You may receive your services from a single individual or multiple individuals belonging to a wealth management team.

What Does a Wealth Manager Do?

Now that we know what a wealth manager is, let’s understand what they do. Wealth managers are skilled professionals in the field of wealth management who offer comprehensive personal finance services. Their responsibilities include gathering and assessing data, making informed decisions, solving financial problems, building relationships, analysing data, setting financial goals, creating customised strategies, and implementing them effectively.

No two wealth managers are the same, and naturally, the services offered by each are also different. In addition, most wealth managers possess a unique set of skills and offer customised services. Here are some of the services wealth managers commonly provide.

• Estate planning
• Accounting services
• Retirement planning
• Strategic tax planning
• Investment advisory services and portfolio management
• Family legacy planning
• Philanthropic planning
• Banking services
• Trust services
• Legal planning
• Risk management and insurance planning
• General long-term financial plann

Based on your exact needs, wealth managers can offer a personalised combination of the above-listed services.

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Who Usually Works with a Wealth Manager?

Wealth managers usually work with high to ultra-high-net-worth individuals. These are affluent clients with several assets and diverse investment needs. In India, high-net-worth individuals (HNWIs) are generally defined as individual investors holding liquid assets up to Rs. 5 crores. Meanwhile, ultra-high-net-worth individuals (UHNWIs) are those with a net worth exceeding Rs. 25 crores. However, each wealth manager has their requirements for onboarding and accepting clients. These requirements could be a certain amount of investable assets or minimum account balances.

What Fees Do Wealth Managers Charge?

Like financial advisors, most wealth managers charge clients based on an annual payment model. Their fees may be a certain percentage of your AUM (Assets under Management). AUM is defined as the total market value of the investments a wealth manager invests on behalf of the client. Some managers may charge clients a fixed or hourly fee instead of an annual fee. Some may even work on a commission basis and earn through the investments that they sell, while others may levy a charge combining all the above.

As a client of a wealth manager, you must note that you are likely to pay for other expenses in addition to the basic, stipulated fees. These include the underlying costs associated with trading, fund management, and brokerage – in other words, the general fees all investors have to pay.

How to Choose a Wealth Manager?

Choosing a wealth manager is just like picking a financial advisor. Here are key factors to consider:

• Know Your Investment Goals 

Start with defining what you want to achieve with your investments. Are you saving for retirement, a vacation, or a child's education? Different goals require different investment strategies. A clear vision will help you find a wealth manager specialising in your desired area, such as retirement planning or estate management.

• Minimum Balances and Client Base

You may also want to check the minimum balances or net worth that a wealth manager requires from a client to take on their services. You can also ask them about their existing client base to know what kind of people they have worked with.

• Certifications and Credentials

Moreover, you must take into consideration if the wealth manager has the necessary advisory certifications and credentials. These will give you an insight into their experience and training in specific financial areas. It also helps to find an advisor who is more relevant to your financial purposes.

• Fee Structure

Another critical factor to consider is the fee charged by the wealth manager. The fee they charge depends on their experience. Choose a manager who offers an appropriate fee structure that works best for you and them.

• Experience

Seek a wealth manager with a proven track record in the investment industry. Look for someone who has navigated various economic cycles and can provide financial solutions tailored to your needs. Their experience can be invaluable in safeguarding your investment portfolio.

• Communication

While daily contact isn't necessary, consistent communication is crucial. Choose a wealth manager who keeps you informed. Ideally, they should provide regular updates (quarterly is a good benchmark) on your portfolio's performance and be readily available to address your concerns.

• Client Reviews

Research and gather feedback from past clients of the wealth manager you're considering. Talk to some of them directly to get a sense of their experience with the professional's customer service and overall approach.

Wealth Managers vs Financial Advisors

As stated above, wealth managers double as financial advisors in most regards, but there are some fundamental differences. Wealth managers differ from financial advisors, financial planners, financial consultants, and investment advisors due to the high level of services they offer. While financial advisors have specific focus areas and can help you with your specific investment needs, the significant difference lies in the degree of assistance you get from wealth managers vs. financial advisors. Wealth managers fundamentally offer holistic services that go beyond investment advisory services. They manage your money extensively.

The difference between a financial planner and wealth manager is that the former only helps clients with generic financial planning needs. Conversely, a wealth manager helps wealthy clients map out a comprehensive and long-term financial plan and assists them with other aspects of financial management, from estate planning to drawing out and executing wills and so on.

Investment advisors, as the words suggest, help clients make strategic investment decisions for their portfolios. However, wealth managers do this and more. They help clients select appropriate investments and sometimes invest on their behalf. Typically, wealth managers have some level of control over decision-making while allocating assets, redeeming, and reinvesting funds, and other aspects of building a corpus.

Here’s a table to summarise the difference:

The Bottom Line

Now that you know what a wealth manager is, you can decide whether to consider availing their services. A wealth manager provides a comprehensive approach going beyond typical financial advisory services. For high-net-worth clients, working with a wealth manager instead of coordinating with multiple financial parties is convenient and far less cumbersome. Before you hire one, make sure you discuss your short and long-term financial plans and check the track record of the wealth manager, the kind of clients they have serviced, and their overall experience with managing a significant investment portfolio.

Frequently Asked Question

1. Which skills are essential for a wealth manager?

   Wealth managers require both technical and soft skills. Essential technical skills include:

   • Capital markets proficiency
   • Portfolio construction ability
   • Financial planning knowledge
   • Quantitative skills
   • Technology skills
   • Foreign language fluency (sometimes)

   Essential soft skills include:

   • Communication
   • Education/coaching skills
   • Sales and business development

2. How does a banker differ from a wealth manager?

   While there are many differences between a banker and a wealth manager, a key difference is that a banker primarily focuses on banking services such as managing accounts and loans. On the other hand, a wealth manager not just handles banking services but also provides investment advice and actively manages investments for their clients.

3. Why do banks offer wealth management?

   Banks offer wealth management services to build strong relationships with customers. These services act as a one-stop shop for financial guidance, increasing trust and keeping clients within the bank's ecosystem, while also generating extra income through fees.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.