Article

Do you need a wealth manager?

27 April 2023 dot 4-minute read
Save and invest Plan Well Feature Healthy Finances Wealth management
Wealth management can help wealthy investors grow and safeguard their assets. (Credit: Shutterstock)
Personalised wealth management services typically cater to high net-worth individuals (HNWI) or those with US$1 million and above in investable assets. They provide tailored and comprehensive financial advice, including asset allocation and tax planning.
 
Wealth managers require clients to place a minimum amount of assets under their management. Wealth managers can help these affluent individuals with their core objectives: to grow, preserve and safeguard their assets.

How much do wealth managers cost?

Wealth managers usually charge an annual fee based on a percentage of their client’s AUM (assets under management). (Credit: Getty Images)
The fees charged by wealth management firms vary depending on many factors, such as the level of service provided and the individual wealth manager's fee structure. Wealth managers usually charge an annual fee based on a percentage of their client's assets under management or AUM.
 
According to Deloitte, traditional wealth managers may charge about two to three per cent for their annual management fee. However, they may offer lower fees for those with more considerable sums to invest. Financial Times reports that fees can fall to 0.75 per cent on portfolios of up to US$2 million.

Wealth management services

If an individual’s goal is to secure their financial affairs 20 to 30 years into the future, consulting with a certified wealth manager can be a worthy investment.
 
Wealth managers develop a strategic financial plan tailored to a client's financial situation, goals, tax exposure and risk tolerance. They also provide expert advice on decisions about investments, insurance, family business governance, tax and estate planning.

1. Financial planning

Wealth managers invest a client's money according to each individual's needs and preferences. If the goal is consistent cash flow, they may invest money in income-generating assets. A wealth manager will consider an individual's entire financial picture, including their income, expenses, assets and liabilities.

2. Investment management

Wealth managers provide bespoke guidance on investment decisions to maximise returns while minimising risk. Overseeing their client's assets can involve selecting appropriate investment vehicles and monitoring market conditions. They may also provide access to investment funds that are not usually available to the average investor. This allows the client to diversify their portfolio.
 
For instance, wealth managers may notify a client when a rising company is about to go public. This gives the client a chance to invest in the company's IPO. Likewise, a wealth manager may inform a client when a startup is open for private equity investment.

3. Tax accounting

Individuals consult wealth managers to learn tax-efficient investment strategies and capitalise on tax deductions. For example, instead of tax loss harvesting, wealth managers can sell certain investments at a loss. This offsets any taxes owed on gains incurred on other well-performing investments.
 
Wealth managers can help preserve wealth for future generations with a comprehensive plan. (Credit: Getty Images)

4. Estate planning

Without proper planning, estate taxes can be costly for those inheriting wealth in certain jurisdictions. Wealth managers can help preserve a client's wealth for the next generation. They can design a plan that distributes assets among beneficiaries in a smooth, tax-efficient manner.
 
Wealth managers can also help create trust funds for a client's children. They can function as part of a broader family office that handles a range of financial, legal and logistical affairs for the family. Family offices have become more common in Asia over the past several decades, in part due to a generational transfer of wealth and family-run businesses.

Is wealth management for you?

Your decision on whether or not to engage a wealth manager will depend on your financial situation and goals. A Bain & Company survey reveals many new clients of wealth management firms want clear guidance on their investments, as opposed to a "do-it-yourself" investing approach.
 
Wealth management can be a holistic service for individuals with significant assets and complex financial needs. Personal research is crucial since professional fees can be steep and significantly impact overall returns. To build a long-term relationship and reap the benefits of this service, finding a trusted, reliable wealth manager is key.
 
A "scarcity mindset" may prevent you from achieving goals. In this episode of AIA Voices, finance experts Anna Haotanto and Lachlan Campbell, with AIA Ambassador Nico Bolzico, explain how this way of thinking prevents financial wellness. Watch as they share tips to put you on the path to financial freedom.
 
 
AIA Voices is a community of influential and educational voices from around Asia to talk about life, health and wellness. A platform to educate, motivate and inspire people to make positive behavioural changes on their health and wellness journey. Providing an opportunity for communities across Asia to connect, collaborate, and learn from each other. Designed to drive AIA One Billion, our ambition to engage a billion people to live Healthier, Longer, Better Lives by 2030.
 
References:
 
Financial Times. 2022. Fees increasingly on the agenda for wealth management clients. [online] [Accessed on 29 March 2023]
 
McKinsey & Company. Winning in the high-net-worth segment in US wealth management. [online] [Accessed on 29 March 2023]
 
Deloitte. 2016. Cost-Income Ratios and Robo-Advisory. [online] [Accessed on 29 March 2023]
 
Corporate Finance Institute. 2023. High Net Worth Individual (HNWI) - Overview, Privileges. [online] [Accessed on 29 March 2023]
 
Bain & Company. 2022. How Up-and-Coming Investors Are Upending the Wealth Management Business [online] [Accessed on December 7, 2022]
 
Corporate Finance Institute. 2022. Wealth Management Advisor. [online] [Accessed on December 7, 2022]
 
PwC. 2019. The increasing trend of family offices in Asia. [online] [Accessed on December 7, 2022]
Disclaimer:
This is general information only and is not intended as financial, medical, health, nutritional or other advice. You should obtain professional advice from a financial adviser, or medical or health practitioner in relation to your own personal circumstances.