Is It Worth Paying a Wealth Manager?
There are many benefits to hiring a wealth manager to handle your finances. You can develop a financial plan for your retirement, investments, and other important decisions. You can establish a risk management plan. Because a net worth advisor works with high-net-worth individuals, their abilities as wealth managers go beyond financial advising, giving you the capability to strategize your wealth-building. The wealth management process with Delta Wealth Advisors ensures your investments are tailored to your needs.
In this blog we’re going to discuss wealth managers and why you might consider hiring one for your financial planning and investments.
Wealth Managers VS Financial Advisors: What’s the Difference?
While both wealth managers and financial advisors work with clients' finances, wealth management is generally limited to clients with high-net-worth and ultra-high-net-worth portfolios worth over $1 million and $30 million respectively. Financial planning and investment management are frequently provided by advisors, but their services can also include preparing for taxes, building a budget, and developing insurance strategies. Because wealth managers deal with high-net-worth individuals (HNWI) and ultra-HNWI, they offer general services like that of an advisor, but might also provide other specialized services like philanthropy, along with legal and tax planning.
To better understand how they work, let’s first look at financial advisors and wealth managers have in common:
- Help clients with lifestyle preparation (budgeting, financial planning, and saving)
- Conduct market research and analysis
- Assess the needs and goals of clients and build a plan accordingly
- Develop and implement strategies
- Identify new opportunities for growth and creating goals
- Consulting clients on financial products and services
- Managing investments for maximum returns
As you can see, they both provide several services that help clients reach their financial goals. On top of those duties, wealth managers also focus on helping HNWI and ultra-HNWI with additional services like:
- Capital gains planning
- Estate planning
- Risk management
In this sense, a wealth manager is a good alternative to a financial advisor for those HNWIs. Depending on your financial situation, you might be considering a wealth manager, but is there a right time to hire someone?
When Should You Get a Wealth Manager?
If you fall into the HNWI or UHNWI, it’s almost always advisable to seek consultation from a wealth manager if you’d like to invest your funds, develop a retirement plan, or build an estate plan. How much money do you need to use a wealth management firm? As we mentioned earlier, high-net-worth individuals are people who have at least $1 million in liquid financial assets, while ultra-high-net-worth individuals have investable assets of at least $30 million.
Of course, hiring a professional means a percentage of your gains goes to wealth management fees.
Are Wealth Managers Worth It?
Determining whether paying a wealth manager is worth it mostly relies on your needs as a HNWI/ultra-HNWI. Your investments can benefit from the knowledge and expertise that wealth managers can offer and, without a professional, your financial planning and management might be difficult to maintain.
According to Vanguard research, over the course of 25 years, an investment could increase significantly more with a wealth manager—as much as 50% more—than when the portfolio is self-managed. Hypothetically a $500,000 investment could grow to over $3.4 million using a manager. That means that compared to a self-managed portfolio, an advisor-managed portfolio would see an average annualized growth rate of 8% over a 25-year period.
Deciding the value of services also depends on how much it costs to work with a wealth manager. Typically clients will be charged a flat fee or compensation based on a percentage of customer assets managed. Most often the percentage a wealth manager takes is based on income level. For a HNWI or ultra-HNWI, these percentages average around 1%, but might be higher with a smaller account balance.
Overall, a wealth manager is worth it if:
- You’re a HNWI with several assets that need to be managed by a professional.
- You need a holistic view of your finances while developing several plans like estates, saving for retirement, and investments.
- You’re considering an important financial decision like purchasing a home or developing an early retirement plan.
Ultimately the decision to hire a wealth manager is up to you, but there are several benefits to having a professional handle your finances, so you can be hands-off and trust you’re building wealth. Deciding on one of the high-net-worth management firms can be a daunting task, but Delta Wealth Advisors will create a tailored plan specifically for your financial needs.