As with any profession, wealth management has its own jargon for clients to get a handle on. Understanding these key terms will help to empower investors, wherever they are on their wealth journey.
The term “wealth manager” is a very broad one covering many different types of institution. Some are investment managers in the purest sense, while others offer financial planning services (alone or in combination with in-house investment management); others still offer the whole suite of financial services including private banking, portfolio management and financial planning advice in areas like pensions and succession. Some also combine corporate banking with private banking for clients who are business owners.
When it comes to the service packages they offer, wealth managers are as unique as the clients they serve, and this can make it a challenge to know which one is right for you. It therefore pays to go into your deliberations with an idea of which kind of service package might be most suitable for you given your financial circumstances, knowledge and wealth level.
Here are some of the many types of service package you might encounter – although bear in mind that many larger firms cover all of them, transitioning clients through their offering as their wealth and financial complexity evolves.
As the name suggests, here an investment management firm just carries out (or “executes”) the investor’s instructions to buy and sell assets on their behalf. It is therefore akin to online investment platforms, although you may be dealing with a person.
Execution-only services are likely to provide you with investment commentary from the firm’s analysts, but these will not constitute recommendations appropriate to your situation at all; all decisions will be yours, so this option is for highly-experienced investors only.
You should also note that using a wealth manager just to carry out transactions is likely to be quite a costly way to manage your investments – and one which wastes the expertise you could be accessing in a fuller relationship.
Many wealth managers only offer investment management services, meaning that clients must obtain financial planning and tax advice from another source. For those with less complex needs – and who prefer taking professional planning advice as and when they need it – pure investment management may be a good option.
Investment management generally takes two forms:
1. Discretionary investment management: Here, investors agree an investment mandate with their adviser (in line with their objectives and risk-profile) and then leave day-to-day portfolio management decisions to them. This is by far the most popular approach as it frees investors from the stress and strain of monitoring the markets constantly. It also allows for buying and selling decisions to be made without delay.
Investment portfolios can be either created bespoke for clients, or they may be offered “model portfolios” where a range have been created to cater to various types of investors’ needs. The former is a more expensive option and unless there is a specific reason for a custom-made portfolio, a model one could serve your needs very well.
2. Advisory investment management: Here, the wealth manager advises you on a broad investment strategy and individual investments, but ultimately the final investment decisions are yours (which again makes this only suitable for experienced investors). As this is a labour-intensive approach, wealth managers usually reserve advisory services only for larger clients.
A full-service wealth manager will combine investment management and financial planning services, but you may have to go elsewhere for banking if the firm is not attached to a deposit-taking institution.
Many of our users wish to have their investment portfolios and financial planning needs taken care of by the same institution, and there are many benefits to a wealth manager having this kind of overview of your financial affairs (not to mention the time and cost-savings that can be achieved).
Private banks generally offer all the services you would expect from a regular bank account, but with special ones for wealthy clients in addition. They also often offer investment management and financial planning advice in-house/through a subsidiary, so private banks can be a “one-stop shop” for all clients’ financial affairs.
There is undeniably a certain cachet to being a private bank customer, but special facilities like high-value mortgages or lending against investment portfolios are the real draws here.
Both private banks and full-service wealth managers can offer a range of specialist services to wealthier clients, many of which might be more lifestyle orientated. If you are philanthropically-minded, an institution might guide you on your charitable giving strategy; or, if you own assets like art or classic cars, they may be able to advise you in these areas too.
At the upper end of wealth, institutions tend to also offer “concierge” services which can encompass everything from helping source top-class education and health provision for clients to giving them access to exclusive events.
Discuss which service package is right for you
As we have explained, wealth management services can be as broad or tightly-focused as your profile and asset level require. The crucial thing is to understand exactly what a provider is able to do for you.
It can be very frustrating to sign-up with an organisation only to subsequently find they don’t offer services that you need, leaving you to search for another provider at a crucial point. On the flipside, you should avoid “doubling-up” on service providers and possibly paying more for elements you do not really need.
Keep an open mind, however. Conversations with potential wealth managers might uncover present (or future) needs you may not have had on your radar. If you are unsure what your specific needs might be and would like an informal chat on the kind of institution which would suit you, please get in touch with our expert team.