What is Wealth Management?
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Wealth Management – an Investment Advisory Service
Wealth management is an investment advisory service offered by banks, investment banks, private brokerages and various funds that address the financial needs of the ultra-high and high-net-worth individuals. The wealth manager or advisor has to completely understand the client’s requirements in order to supply bespoke financial packages.
Understanding Wealth Management
The top ten wealth managers in the world consist of mainly American financial institutions the top three being, Bank of America, Morgan Stanley and J.P.Morgan. The only non-American institution is the Swiss banking conglomerate UBS which ranks 5th largest in the world.
High-net-worth individuals are the main clients for the wealth management divisions of banks and investment banks, and each client is assigned their personal wealth or investment advisor/manager. It is usual for this advisor to co-ordinate every area that touches the financial life of the client, from managing investment of assets to estate planning, due diligence, budgeting, tax planning, insurance and trusts for offspring to mention but a few of the client’s requirements.
When it comes to managing investments there are two types of investment services the wealth manager can offer, advisory and discretionary.
Advisory wealth management as the name implies is where the wealth manager advises the client what he feels is the correct investment strategy, but the final decision rests with the client.
Discretionary wealth management means the client hands over total control and the wealth manager can buy, sell or hold as they see fit. However, in agreement with the wealth manager the client can insist a certain percentage of the investment portfolio is in equities or bonds etc. The wealth manager will always be working in tandem with the company’s research department to ensure the best returns.
Wealth Management Fees
A management fee that is charged by the wealth managers is made up of various charges. The obvious charge is the fee for professionally managing the client’s investment portfolio, and this tends to range from 0.10% to 2% of assets under management, (AUM).
Other fees included in the management fee will be administrative costs, investor relation costs and advisory fees.