Quick question: Why is ‘wealth management’ called ‘wealth management’ and not ‘money management’?
The answer is simple. Money is simply a tool, a medium of exchange. Wealth, on the other hand, includes tangible and intangible things that makes a person, family or group better off (x).
In wealth management, ‘tangible and intangible things’ can include many things. Investopedia defined this service as a combination of ‘financial/investment advice, accounting/tax services, retirement planning and legal/estate planning’. Depending on wealth management professionals, they may also provide ‘banking services or advice on philanthropic activities’.
In short, wealth management professionals answer much more than ‘where should I invest?’
Who needs wealth management services?
It can be argued that everyone needs wealth management services. In a sense, everyone starts off by being their own wealth managers – after all, no one looks out for our own self-interests more than ourselves.
In this case, the more money you have, the likelier you require the services of a wealth management professional. It is the same reason why you would employ a Human Resources Manager – it is easy to manage one person, but hard to manage a bigger number of people. It is easy to manage a small sum of money, but hard to manage a larger sum of money.
People who have a lot of money are called High Net Worth (HNW). There are conflicting views on how much money is required to be included in this category, but this study on the wealth management industry puts the definition as ‘individuals with more than US$1 million in investable assets’.
According to the same study, if you have ‘more than US30 million in investable assets’, that would put you in the Ultra High Net Worth (UHNW) category.
There are many attitudes to wealth management. Some people prefer to delegate the work, so they can focus all their energy in building empires. Some people don’t like the idea of sharing something as intimate as money details with someone else, even to a professional. Some people automatically accept it, as advised by their mentors. Some people have a do-it-yourself approach and simply want to save money on fees. The reasons are as varied as we are human.
Attitudes aside, HNW and UHNW individuals can greatly benefit from wealth management services. Wealth management simply becomes a strategy, a part of an overall business plan, a solution to a problem.
Where can you find suitable wealth management services for you?
Interestingly, this is not an easy question to answer. There are many wealth management firms that are happy to serve you, however the wealth management industry is currently experiencing major changes to cater to the demands of new HNW and UHNW demographics. What was traditionally seen as an old white man’s territory is now opening up to more diversity, including women and millennials-specific wealth management services. There are also new technologies being used, such as robo-advisors. This will significantly shift the client recruitment strategies of wealth management firms. Furthermore, clients also expect more fee transparency and digital security.
In short, the best wealth management service for you is the wealth management firm that has the experience in serving your specific demographic.
Wealth management is no longer something that is exclusive to the elite few. The world economy generated much wealth to other demographics, and wealth management firms will be quick to adapt to stay in business. If you are (or on your way) to become a HNW individual, we strongly suggest you to look into the services offered by wealth management professionals to increase and protect your wealth.
Note: Wealth management professionals go by many names – financial advisors, financial advisory specialists, wealth managers, professional money managers, etcetera. For this article, we will call them as they are – wealth management professionals.