What is Private Wealth Management?

Private wealth management is all about preserving and growing your money. More comprehensive than a general financial plan and personal budget, a private wealth advisor deals with not just immediate concerns, but long-term goals, legacies, trusts, and multi-generational financial planning. Your wealth advisor should be a trusted voice in your financial life, as they are likely one of the key figures you and your children will turn to for advice.

But you don't necessarily need to be a high-net-worth individual to work with a private wealth advisor. These advisory firms come in many shapes and sizes, with differing qualifications, and varied wealth management services. And not all of them are necessarily trustworthy.

After toiling away in the financial industry for over 40 years, there’s a lot I want to share about investment management and the people behind portfolio services. If you're looking for a trustworthy financial planner and wealth management advisor, here is what you need to know.

What is Private Wealth Management?

To put it simply, private wealth management is a type of financial advisory service that goes far beyond general financial planning. A private wealth manager can provide a number of services, including access to financial products, charitable planning, multigenerational estate planning, portfolio tax management, and investment management.

In other words, a private wealth advisor dives deeper into your finances and objectives than a general financial planner.

Do you need to be wealthy to work with a private wealth manager?

Not necessarily. While many private wealth managers focus on high-net-worth individuals, you don't necessarily need millions in the bank. However, many have minimum assets under management (AUM) requirements. This is often to ensure that you are actually making money, especially when working with a registered investment advisor (RIA), who takes a percentage fee.

For example, at Encompass Advisors, our fee is 1% AUM annually and requires that our clients have at least $200,000 worth of assets. This ensures that our fee does not eat into your profits.

What are the benefits of a private wealth manager?

There are a number of reasons someone chooses to work with a private wealth manager. As a finance professional in investment management, a private wealth advisor has more resources to handle complex retirement planning, legacies, and investment types. Fiduciaries, in particular, often have access to institutional investments, which are not available to a regular financial planner or broker.

For example, private funds require investments worth five million in investments to access. Many investors and wealthy individuals don't have the money to put in one fund or don't want to. But through a registered investment advisor, they can gain access to that five million fund for $5000.

Many of these investment types also have lower fees and higher returns compared to regular financial products. Investing in a registered investment advisor at a wealth management firm can help you not only preserve your wealth but grow it with high-quality assets.

But there are other wealth management services as well, including:

• Heldaway accounts
• Legacy planning
• Retirement planning
• Tax mitigation
• Cash management
• Commission-free assets and insurance

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How do I find a private wealth manager I trust?

The greatest challenge is finding someone that you trust.

Unfortunately, much of the investment management game is smoke and mirrors. Fewer and fewer registered investment advisors own their own businesses.

Decades ago, your RIA acted in a similar way to your family doctor or lawyer. He or she knew you, your family, and your community. There were few mega-corporations and there were only two types of advisory licenses: One for brokers and another for fiduciaries. If you went to a licensed registered investment advisor, you could be sure that, legally, they were obliged to support your best interest. 

Now there is a third option, a dual licensed advisor, under which someone might be both a fiduciary and a broker. But you cannot be sure when they acting in your best interest, or interested in claiming commission.

With the growth of wealth management corporations, registered investment advisors today are similar to medical specialists—it takes months to get an appointment, and they work with hundreds of clients a month. It's unlikely that they truly know you as an individual, and as a result, they are simply making investment decisions off technical analysis. 

While crunching numbers is an essential part of investment management, it's only a piece of a puzzle. A datasheet won't help your children navigate the legacy process, assist a widowed spouse with their financial plan, or have in-depth discussions about how whether you should buy a new car or start a business. 

These corporations want revenue, they want a headcount of clients to boost shareholders' confidence. They can't afford true connections with their clients.

That's one business model. But there's another model—the small RIA firm that focuses on building relationships as well as portfolios.

We fall in the second camp, but this isn't to say we're the right firm for you. After all, we've likely never spoken before (you can book a call, though). But we believe that forming real relationships with our clients leads to better portfolio management, financial planning, and more transparent investment decisions.

So if you want to work with a wealth management firm you can trust, we recommend looking for the following things:

1. They should be licensed under the Investment Advisers Act of 1940 or a similar state act to be considered a fiduciary.
2. They should not be dual-licensed.
3. They should have a short contract, no longer than 2-3 pages.
4. They should have a real person answering the phone, every time.
5. They should be able to walk you through their process, step-by-step.

We also recommend that your chosen financial advisor share similar values with you and your family. When you work with a private wealth advisor, you are likely to speak with them on a regular basis, for years. This individual should be someone you feel comfortable around, both for investment decisions and discussing complicated family matters, as these things do tend to come up. 

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