The term 'wealth management' is a broad and vague one. For many people it conjures up images of millionaires visiting posh offices in Mayfair to find out how their enormous portfolios of racehorses, exotic bonds and overseas shares are performing. For others, the title 'wealth manager' is simply interchangeable with 'financial adviser'.
In today's world, wealth managers vary greatly in size and capability. A glance at the Wealth Management Association's 185-strong member list reveals a wide range of wealth managers, from execution-only stockbrokers to companies offering all the bells and whistles of bespoke portfolios and holistic financial planning.
Lee Goggin, co-founder of findawealthmanager.com, defines a wealth manager as a private bank or investment manager that manages money 'in-house'. Indeed, it seems that hands-on investment management is often the point of difference between a wealth manager and a financial adviser.
Lauren Charnley, a stockbroker at Redmayne-Bentley, agrees: 'A wealth manager will look after a client's investments; although they'll take into account the client's personal financial situation, they will not [always] advise on all aspects of it. A financial adviser will look at the whole financial situation, including mortgages, pensions etc. So, for example, a financial adviser might advise a client to consolidate all their pensions into one pot, and then the wealth manager would advise on the investments held within that pot.'
Goggin adds: 'Generally, a financial adviser is associated with smaller, local business. They provide advice on a wide range of financial topics, from will-writing and insurance to investment portfolios. They typically outsource most of their underlying services to third parties and then monitor and oversee. Wealth managers do most things in-house.'
Whether or not wealth managers limit their services exclusively to high net worth clients, and whether or not they offer more than just investment management, depends on the firm.
Tiers of service
Some of the larger wealth management firms offer different tiers of service, depending on what the client wants, and more importantly, how much money they have to invest.
Killik & Co, which manages more than £3 billion on behalf of 27,000 clients, offers a variety of services. Its monthly savings plan requires a minimum investment of just £200 a month, while its advisory broking account requires no minimum. However, its managed portfolio and discretionary broking account are only available to clients with £100,000 to invest. The former is a bespoke portfolio with a dedicated broker for investors who don't want to make investment decisions, while the latter creates a personalised investment strategy for a broker to execute.
Over at Brewin Dolphin, although it offers a range of financial planning services to clients, the 'premier service' is discretionary management. 'Discretionary' management means a specialist manager will do all the legwork for you in creating and maintaining a portfolio aimed at achieving your objectives. Brewin Dolphin says its service is 'an attractive and convenient solution for those without the time or inclination to take an active role in managing their investments'.
For clients of execution-only stockbrokers, the ability to get away from a simple online portfolio and access wealth management is often down to a minimum portfolio size. Thus the minimum for Redmayne-Bentley's managed service is £50,000. 'Investments can be tailored to meet the client's specific requirements,' comments Charnley.
The wealth management market can also be split into different banking tiers. Goggin explains: 'The first tier is retail banking, which serves the everyday cash flow needs of the typical consumer. Premier banking is one level above; while providing all retail banking services, premier banking customers often also have access to investment opportunities, for example stock and share options. Private banking offers a higher level of service still, including sophisticated investment management with access to almost every conceivable asset class, and personalised services to advise on wealth management.'
He adds: 'Individuals typically hit the threshold to become private banking clients when they accumulate between half a million and a million pounds of investable wealth.'
Ultimately, a wealth manager should aim to provide clients with professional - and to some extent personalised - advice about how best to achieve their financial goals and how to protect and grow their money.
'Once a wealth manager digests a client's requirements - such as risk tolerance, when they expect to retire, whether they intend to set up a trust fund or fund a child's education - then a portfolio can be built to match these criteria,' says Goggin.
According to Goggin, alongside tax planning, additional services that a wealth manager might be able to provide include: the provision of mortgages; advice on art and wine; relocation services; and networking opportunities.
Ben Stott, director of Affinity Private Wealth, a Jersey-based boutique firm, says: 'Clients should expect their wealth manager to be a long-term partner, helping to protect and enhance their assets and achieve their financial goals.'
Some clients will appreciate discretionary management. Others will be happy to have a bit of advice and help in constructing their own portfolio, possibly using some racier investments such as options, contracts for difference or overseas shares. Personalised services may also come with a dedicated adviser.
Should I use a manager?
Just as the services offered by wealth managers cover a broad spectrum, the minimum amount of money needed to access one varies widely.
Many companies (such as Redmayne-Bentley) are happy to take clients with £50,000 to invest, and some even say they don't have a minimum investment. According to Paul Killik, senior partner at Killik & Co, an important part of his firm's philosophy is to be 'accessible and unintimidating, with a minimum commission of £30 and no minimum portfolio size' needed in order to open an account there.
Others stipulate higher minimum amounts - Affinity Private Wealth targets investors with more than £500,000 to invest, while Coutts clients typically need £1 million.
For investors looking for more than just a DIY online portfolio, and more specialised investment advice than a financial adviser can offer, a wealth manager could be a good solution. But remember to look closely at the services on offer, and the accompanying fees, to find the right one for your needs.
How much does wealth management cost?
It may seem that the sky's the limit when it comes to the services certain wealth managers can provide for their clients. But how much does it all cost?
Lee Goggin says investment management fees typically range from 0.75 to 1.5 per cent, and wealth planning services are either included or charged by the hour. He says charges have become more transparent, but it's still difficult to compare like with like, as firms have their own charging structures incorporating fixed fees, hourly fees and/or charges as a percentage of the portfolio.
At Affinity Private Wealth, investment services are charged on an all-inclusive basis (including management, custody and dealing costs) as a percentage of the assets held, starting at 0.95 per cent per year. 'Other services, such as wealth consulting and trust management, are charged on either a fixed fee or a time spent basis,' says Stott.
Killik & Co offers a variety of charges on its different services. For the advised dealing and advised portfolio services there is dealing commission of 1.65 per cent on the first £15,000 and 0.5 per cent on the balance; there is no annual fee. For the managed portfolio and discretionary broking services the dealing commission is 1 per cent on the first £15,000 and 0.5 per cent on the balance; the annual management fee is 1 per cent for the first £500,000, 0.75 per cent for the next £500,000 and 0.6 per cent for assets over £1 million.
Over at Coutts a £2,000 planning fee is charged for the wealth management advice service, with initial and ongoing advice costs on top of upwards of 0.8 per cent of assets; and there may be other product or service management fees to pay too. Redmayne-Bentley charges an annual management fee of 0.85 per cent plus VAT for its managed service. It also charges commission for each trade (minimum £25 fee, 1.75 per cent on the first £10,000 and 0.5 per cent on the balance).
Goggin points out that 'money talks', and clients can negotiate fees. 'But typically, negotiation on fees is only entertained for accounts over £1 million,' he adds.
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