What is Private Wealth Management?

While many traditional brokerage companies may use model-based investment portfolios and financial plans, a private wealth manager takes a more customized approach in building a wealth management strategy. Because each investor is different, with unique financial goals and objectives, their financial plans and investment allocations should be tailored to their specific financial situation. Just as the financial markets fluctuate over time, so do clients’ goals and objectives, so it is up to the advisor to stay diligent and keep an open line of communication with his or her clients.  

Not only should a private wealth manager stay up to date with each client’s individual needs, but he or she should offer a range of services that touch upon many different aspects of financial well-being. In order to provide the best recommendations to reach a client’s goals, a private wealth manager should take into account many different facets of the client’s financial life, including current work environment, proximity to retirement, life goals, spending patterns, large future purchases, intended succession plan, etc.  

After reviewing each client’s unique situation, a private wealth manager can then accurately provide a wide range of different services to optimize their wealth. Instead of focusing on only asset allocation, or only financial planning, a private wealth manager typically offers a breadth of services to both protect and grow their client’s wealth. These services usually include investment management, tax planning, financial planning, estate planning, education panning, charitable giving planning, and more. They also may coordinate these plans with other outside professionals, such as attorneys or CPAs, to develop a more comprehensive approach.  

Private wealth managers can be either independent or bank-affiliated. Independent firms tend to offer more personalized service, while bank-affiliated firms may only offer products that are available through their respective bank.  

Many individuals with more complex financial situations may choose to work with a private wealth advisor. Investors with a significant amount of assets, multiple streams of revenue, complicated tax situations, or large estates may prefer working with a single private wealth management company – one that can handle all of their investments, financial planning, tax planning, and estate planning under one roof. For example, a business owner or business executive late in their career may want to refine their current strategy so each area of their wealth (e.g., investments, financial plan, tax, and estate) is coordinated as they prepare for retirement.

Individuals with large portfolios are also often eligible to invest in otherwise-restricted securities. For example, an investor working with a private wealth advisor may have access to investments like private placements, private funds, and alternative investment options that may be more complex than traditional retail brokerage companies can offer. Accessing these investments may offer increased diversification and alternative streams of income to help improve portfolio performance.

If you are considering working with a private wealth advisor, the first step is to interview different companies to learn more about their services, options, and fees. From there, building a strong relationship with an advisor will be the cornerstone for future success in each area of your financial plan. Below are some questions to consider when interviewing a private wealth advisor:

• Does the advisor have experience working with accounts similar to your account size?
• How large is their largest account?
• How long have they been working with their clients?
• What is their average client retention rate?

Most private wealth managers charge a fee based on assets under management, meaning they will bill on a portion of the assets their clients hold with them.

• Are the manager’s fees reasonable?
• How do this company’s fees compare to other companies’ fees?
• What is their strategy for collecting fees in a way that minimizes tax liability?
• Does the advisor receive commission for recommending specific investments?

A fiduciary is an advisor that is bound to the Fiduciary Standard – they must always put the client’s interests ahead of their own. Any private financial advisor you work with should be a fee-only fiduciary.

• Does the advisor follow the Fiduciary Standard or the Suitability Standard?
• Does the advisor have any conflicts of interest?

It’s imperative to find an advisor who you trust, as they will have access to very sensitive information. Make sure you can envision yourself working with the wealth manager for a very long time, and be as honest and transparent about your situation as possible.

• How often can you expect to hear from your advisor?
• What does the review process look like?
• What is your process for making changes to my investment account?
• What does account security look like at your company?