Wealth Manager: More Than Just an Investment Manager

by Chris Cahill, J.D., CFP®, CAP®, Principal, Family Office Services

Most people know what a CPA does (prepare taxes, help clients minimize tax hit, etc.) or an estate planning attorney does (draft wills and trusts, create estate plans and administer the probate of estates) and they assume they know what a financial advisor does. Unfortunately, there is a mismatch between perception and reality in many instances as it relates to what people think financial advisors do and what they actually do.

A friend of mine in the business gave me a statistic the other day that was staggering: 70% of individuals in “our” business hold themselves out as Wealth Managers; yet only 7% of that same group actually do anything more than investment management.  I was somewhat shocked by this statistic at first, but the more I thought about the people I know and have worked with in the business it strikes me that it is likely (and sadly) pretty accurate (apologies to all of you who fit into that group).  What does that mean for those of us who are “true Wealth Managers”?  Unfortunately, it means that the population at large has come to equate the term Wealth Manager with Investments Manager – full stop.

Clients and prospects do not understand that a true Wealth Manager is someone who helps their clients with all aspects of their personal finances including:

1. Developing and identifying needs and goals and hopes and dreams (not only for themselves, but their families, their businesses and whatever philanthropic endeavors they are passionate about)
2. Engaging the family members in discussions about family governance and the true meaning of wealth to the family.  Helping them all understand that the wealth of the family is not counted in mere dollars alone, but includes other aspects such as human, intellectual and social components as well.
3. Constructing financial models to assess where they are relative to their stated objectives
4. Making recommendations and developing financial models to help illustrate alternate or “what if” scenarios to help them better achieve their objectives
5. Coordinating income tax planning strategies to reduce the current tax hit and developing strategies to reduce their exposure in the future as well
6. Consulting on estate and trust planning (showing clients how their current planning works, what the tax ramifications of their planning – or lack thereof -are; who gets what and when; and making a series of thoughtful recommendations to help the clients better achieve their objectives)
7. Helping clients think through their charitable inclinations and developing a coordinated program that is targeted to the unique philanthropic intentions of the family
8. Paying attention to foreseeable and unforeseeable risks that confront the family and helping them ensure that they have proper insurance coverages in place (including, Property & Casualty Coverage, Errors & Omission Coverage, Directors and Officers Coverage, Life Insurance, Long-term Care and Disability Insurance)
9. Developing and implementing business succession strategies (do you have a management team in place that can run your organization if you become disabled or pass away?)
10. Helping a family think through what their wealth means to them and how they want to be remembered (developing a thoughtful and lasting legacy for themselves and their family)
11. And, oh by the way…. managing investments

Interestingly, if you look more closely at most self-proclaimed “Wealth Managers”, you will find that they often specifically state that they are not providing the services outlined above.

As an industry, we have done a poor job getting clients and prospects to expect anything more than pure investment advice from their financial advisors – even if they fancy themselves a “Wealth Manager.”  A true Wealth Manager will do all of those items outlined above and will be in a position to coordinate all aspects of your family’s planning to ensure that family’s needs, goals, hopes and dreams are being looked after and nurtured to the largest extent possible.  A true Wealth Manager recognizes that they provide far more than simple investment management.  The clients of a true Wealth Manager understand that as well.

Many of the advisors out there who are focused primarily on investment management, have actually convinced themselves that they are, in fact, “Wealth Managers.”  How can this be? Well, if you say something long enough, with enough conviction, to enough people, eventually you will start to believe this story yourself.  It’s sad really.  Simply wishing something were so does not make it so.  You actually need to put in the time, you need to obtain the education, you need continue that education and you need to put what you have learned into practice.

So, how does one go about finding a true Wealth Manager?  One of the best places to start is by focusing on industry recognized designations.  Simply holding a securities license (Series 7 or Series 63 or the like) is not sufficient in my opinion.  You need additional training.  Looking for someone that is CERTIFIED FINANCIAL PLANNER™ professional or CERTIFIED PRIVATE WEALTH ADVSIOR® designee is a good place to start.