In Wealth Management

Wealth management is a consulting service that seeks to improve an individual’s financial state.

That’s the high-level definition, at least.

As the owner of a boutique wealth management firm here in Seattle, I work with clients to help develop and implement wealth management strategies. I also know there are questions around what, exactly, wealth management entails.

Here’s a quick breakdown.

The Definition of Wealth Management

While, in principle, any consulting service that seeks to improve an individual’s financial state could be considered wealth management, the reality is that, in practice, wealth management refers to a narrower set of activities.

Here’s how Investopedia defines the term:

“Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients. It is a consultative process whereby the advisor gleans information about the client’s wants and tailors a bespoke strategy utilizing appropriate financial products and services.”

NerdWallet offers a similar take:

“Wealth management is the highest level of financial planning services. Wealth management generally includes comprehensive investment management alongside financial advice, tax guidance, estate planning and even legal assistance.”

Finally, to round out our survey of definitions, here’s Smart Asset’s version:

“A wealth manager is a subset of financial advisor that primarily offers high-net-worth and ultra-high-net-worth clients wealth management services. But a wealth manager’s role is far more comprehensive than just offering investment advice. They focus on a holistic suite of services that encompasses all parts of a person’s financial life.”

As you can see, there are a few common threads here.

First, wealth management typically involves financial consulting services provided to affluent individuals. Affluence can be further broken down into a few different categories. The broadest category is “mass affluent”, who have investable liquid financial assets between $100,000 – $1,000,000. “High net worth” typically is defined as having investable assets between $1 million – $5 million.  A “Very High Net Worth” individual has over +$5 million in investable assets.

Furthermore, those individuals who anticipate growing their assets substantially over time, via salary, employee stock options, or inheritance, would also fall under the affluent definition (for instance, a doctor that just got out of medical school with lots of student debt, but still has a high career earnings potential).

In my perspective, nearly every type of affluent individual could benefit from some financial guidance and it is up to the individual (and their advisor) to balance out the level of service with need. For instance, I believe nearly everyone should have basic estate planning documents completed. As wealth increases, it typically warrants a greater use of more advanced strategies.

Second, wealth management tends to be comprehensive. A wealth manager typically looks at all of a client’s financial activities, assets, and anticipated events, as well as goals for both the short- and long-term. Based on this information, wealth managers work with their clients to both develop and implement wealth management strategies.

For instance, a wealth management engagement wouldn’t involve only a single service (like tax or insurance consulting). In the same way, wealth management isn’t a one-off engagement (like a financial plan); it’s a partnership over time, with wealth management strategies evolving as your life situations and goals evolve.

Finally, wealth management tends to be bespoke. It’s tailored to an individual’s goals and needs, not delivered as a cookie-cutter recommendation.

So, here’s my definition of wealth management:

Wealth management is customized, comprehensive, and long-term financial consulting and services for affluent individuals.

Wealth Management Strategies

Given the definition of wealth management, let’s look at some of the common strategies used to deliver this service.

Wealth creation. This wealth management strategy is aimed at building wealth; this is often a goal for early-to-mid-career affluent individuals.  It can involve higher levels of investment risk (in search of greater financial returns), but also may simply be taking advantage of many investment vehicle options to help individuals save.

Wealth optimization. This wealth management strategy is aimed at continuing to build wealth, with perhaps greater diversification and risk management, by type of account. It may involve giving yourself permission to enjoy the money you have worked so hard to create. We believe that spending money (prudently, of course) on a second home or luxury item can be a great use of personal capital. This is often used by mid-to-late career individuals.

Wealth preservation. This wealth management strategy is aimed at making wealth last over time. By reducing risk, this strategy reduces the potential for the highest rates of return, but increases stability. This approach is often favored for late-career or retired individuals.

These are, of course, only very general strategic buckets. A key feature of wealth management is that the specifics of the service are tailored to you.

Wealth Management Benefits

Finally, let’s examine some of the benefits associated with wealth management.

Wealth management can improve your ability to reach personal goals.

I’ve written multiple times about the research on the returns associated with financial advisors. Since wealth management is a subset of financial advising, the same premise holds here. As noted above, though, wealth management isn’t always about increasing returns. Sometimes it is about donating to a deserving charity, helping out a relative that is struggling to pay tuition, or insuring yourself against future risk.  It often is as much about the process of using your hard earned money in a way to bring joy to you and others.

Wealth management can give you peace of mind.

In addition to improving your ability to reach your goals, wealth management can also help give you peace of mind. At a foundational level, wealth management may allow you to spend less time thinking about your wealth; you can designate financial activities to a trusted consultant. If you prefer to be involved in day-to-day financial strategies, a wealth manager can still increase your peace of mind by giving you an objective, informed perspective on your portfolio.

Looking for Wealth Management in Seattle?

I hope that this review of wealth management is helpful as you consider your own financial goals.

If you believe you could benefit from wealth management and you’re ready to take the first step, let’s schedule a consultation.

I have over 30 years of working in the financial services sector. This has given me a deeper understanding if the risks and rewards of investing as well as familiarity within a broad range of financial service offerings. If you are ready to thoughtfully assess your financial situation and work towards achieving your goals with thoughtful investment advice, we may be a good fit.

Schedule a review of your portfolio today, and let’s take the first step toward figuring out what’s best for you.

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