Imagine watching your retirement portfolio drop by 30% during a market downturn, unsure whether your financial future remains secure.
What would you do? Buy? Sell? Stop spending?
This scenario became reality for many investors during the 2022 market correction, highlighting why the role of a wealth manager extends far beyond just investing money.
Understanding the role of a wealth manager has never been more critical as today's financial landscape grows increasingly complex. From navigating market volatility to managing tax implications and planning for generational wealth transfer, the expertise provided by these professionals can make the difference between financial uncertainty and confidence in your future.
The truth is, many smart and financial savvy investors work with a wealth manager.
Why?
Because they are smart enough to realize that they aren't experts in everything, they understand that experience matters, and they value their time.
Whether you're approaching retirement or already enjoying fun in the sun, having a trusted wealth manager by your side can help you navigate life's financial complexities while protecting and growing your hard-earned assets.
Key Takeaways
Wealth managers provide comprehensive financial planning that goes beyond basic investment management, including tax strategy, estate planning, and risk management.
The best wealth managers take a holistic approach, considering your entire financial picture rather than just managing investments.
Regular meetings and proactive communication with your wealth manager help ensure your financial strategy stays aligned with your changing life circumstances.
A wealth manager can help coordinate with other financial professionals like CPAs and estate attorneys to optimize your overall financial strategy.
Understanding fees and compensation structures is crucial when selecting a wealth manager to ensure transparency and alignment of interests.
Table of Contents
See How Our Firm Can Help You Retire With Confidence
Retirement Planning - Optimize your income and create a roadmap for a secure retirement.
Investment Management - Personalized investing to grow and protect your wealth.
Tax Planning - Identify tax strategies including Roth conversions, RMD management, charitable giving and more...
What is a Wealth Manager?
A wealth manager serves as your personal financial quarterback, coordinating various aspects of your financial life to help you build and maintain long-term wealth.
These professionals typically work with high-net-worth individuals with over $2 million who have complex financial needs requiring sophisticated solutions.
Selecting a wealth management team with credentials such as the CERTIFIED FINANCIAL PLANNER® designation (CFP®) or Chartered Financial Analyst (CFA) is crucial, as these designations ensure the advisor and/or his team has the necessary expertise and experience to meet your financial needs effectively.
Additionally, verifying the wealth manager through the Financial Industry Regulatory Authority's (FINRA) Broker Check ensures that the wealth manager is registered with relevant regulatory bodies, which is critical for compliance and trust in the financial industry.
“The role of a wealth manager is to serve as a trusted advisor who understands not just your investments, but your entire financial picture - including your goals, fears, and family dynamics,” explains Mark Fonville, CFP® at Covenant Wealth Advisors, a wealth management firm in Virginia.
“We’re here to help clients make informed decisions that align with their long-term objectives while navigating the complexities of today’s financial markets.”
Pro Tip: When evaluating wealth managers, look for those who take time to understand your personal goals before discussing specific investment strategies or products. Starting with an investment strategy is no different than a doctor staring with a recommended surgery. Both can leave you worse off than where you started.
Core Services Provided by Wealth Managers
Investment Management
Wealth managers develop and implement sophisticated investment strategies tailored to your specific goals, risk tolerance, and time horizon. This includes:
Portfolio construction and regular rebalancing
Risk management and diversification
Tax-efficient investment strategies
Alternative investment opportunities when appropriate
Retirement Income Planning
Let's face it - figuring out how to turn life savings into reliable retirement income can feel like trying to solve a Rubik's cube blindfolded! That's where your wealth manager comes in, creating a retirement paycheck that helps you sleep well at night.
A solid retirement income plan typically includes:
Stress testing the probability of successfully enjoying your life in retirement without running out of money. (See: How A Monte Carlo Analysis Can Help With Your Retirement Income Projection)
Designing your very own "retirement paycheck" - regular monthly deposits that feel just like your working years.
Building in safety nets for unexpected expenses (because life has a funny way of surprising us!)
Optimizing Social Security claiming strategies - timing really is everything here.
Setting up a "bucket strategy" to protect against market downturns while keeping your money growing
Tax Planning and Optimization
Working in coordination with your CPA, we believe the best wealth managers help implement tax-efficient strategies such as:
Tax-loss harvesting
Strategic Roth conversion planning
Charitable giving strategies
Tax-efficient withdrawal strategies in retirement
Tax-managed concentrated stock diversification
Tax return analysis to help reduce federal and state taxes
Tax planning can be one of the most powerful tools for a wealth manager. Unfortunately, wealth managers at major brokerage firms often aren't allowed to do any tax planning!
Estate Planning Coordination
Your wealth manager collaborates with estate planning attorneys to help ensure your wealth transfer goals are met through:
Legacy planning strategies
Trust planning and implementation
Charitable giving solutions
Family wealth education and communication
Titling accounts correctly and assigning proper beneficiaries
Risk Management and Insurance
Protecting your wealth is just as important as growing it. Wealth managers help identify and address potential risks through:
Insurance needs analysis
Long-term care planning
Asset protection strategies
Business succession planning if applicable
How Wealth Managers Differ from Other Financial Advisors
While many financial professionals offer investment advice, we believe the best wealth managers provide a more comprehensive and sophisticated level of service. Their holistic approach considers how different financial decisions impact your overall wealth picture.
While financial planners address a wider range of everyday financial needs, wealth managers focus on more comprehensive services for high-net-worth individuals.
“The difference lies in the depth and breadth of services provided,” notes Scott Hurt, CFP®, CPA at Covenant Wealth Advisors.
“A wealth manager doesn’t just manage investments - we coordinate with other professionals, anticipate potential challenges, and proactively identify opportunities to enhance our clients’ financial lives.”
Pro Tip: Consider working with a wealth manager who also incorporates tax planning. This indicates a commitment to a higher level of standard when it comes to managing your investment portfolio. Ask yourself, how can my advisor manage my money if they don't also fully understand my tax situation?
Case Study: A Wealth Management Success Story
Meet Tom and Sarah Johnson, a hypothetical couple who came to us with concerns that might sound familiar. At ages 62 and 61, they had built up a nest egg of $2.8 million through years of hard work and disciplined saving.
While this was certainly a healthy sum, they weren’t sure if it was enough to support their retirement dreams. We worked with them to develop comprehensive financial plans tailored to their unique financial situation and goals, ensuring they could achieve both their short and long-term objectives.
Their Challenges:
Uncertain if their $2.8 million portfolio would last through retirement
Worried about tax implications of retirement account withdrawals
Wanted to determine if a Roth conversion strategy made sense
Confused about when to claim Social Security benefits
Unsure about the best way to give to their church/charity
Wanted to travel and spend time with family without financial stress
Needed help determining the optimal retirement withdrawal strategy
The Wealth Management Solution
Working with our team at Covenant Wealth Advisors, we developed a comprehensive strategy that addressed each of their concerns:
Created a tax-efficient withdrawal strategy using multiple account types
Developed a Social Security claiming strategy that maximized their lifetime benefits.
Established a "bucket strategy" to protect against market volatility.
Tax Optimization:
Implemented strategic Roth conversions before RMDs kicked in
Created a tax-efficient investment portfolio.
Analyzed tax return to identify additional federal and state tax deductions/credits.
Investment Management:
Designed an implementation plan to migrate their portfolio to a more optimal portfolio over time.
Built a diversified portfolio aligned with their risk tolerance.
Implemented dividend-focused strategies for reliable income.
Legacy Planning:
Updated estate documents in coordination with attorney to reflect their wishes.
Structured accounts to minimize taxes for their beneficiaries.
Created a gifting strategy for grandchildren's education.
The Result
Today, Tom and Sarah are enjoying their retirement with confidence. They've taken three major trips in the past year, spend regular time with their grandchildren, and most importantly, sleep well at night knowing their financial future is secure.
Their portfolio is structured to provide reliable income while still growing to combat inflation, and they have a clear understanding of how much they can safely spend each month.
Pro Tip: The earlier you start working with a wealth manager before retirement, the more opportunities there might be to optimize your financial situation through strategies like asset location strategy and building different wealth buckets to help better manage taxes in the future.
The Process of Working with a Wealth Manager
An important component of your experience with an advisor, is the process they actually follow to provide you great advice. We've found that the best wealth managers clearly articulate their client experience. You should know exactly what to expect and when.
For example, at our firm, we follow the process below:
Intro Meeting - Initial Conversation
The first steps is to meet virtually via phone or zoom video or in person depending upon your location. During the intro call, we will get a high level understanding of your your family background, finances, goals and concerns.
Specifically, we may discuss any of the following:
Your family history and career.
Specific concerns or pain points with your finances.
Short and long-term goals. Think retirement, travel, charity, new home, helping kids or grandkids, etc...
Current financial situation
Investment preferences and investment experience
Family dynamics and legacy wishes
We will also answer your questions about our team, process, and pricing. By the end of the intro call, we should both have enough information to know if it makes sense to continue with a free assessment.
Discovery
During the discovery phase, we’ll collect physical data including the following:
Most recent tax return
Investment statements: 401(k), IRAs, Roth, Trust, brokerage accounts
Insurance coverage
Cash flow/monthly expenses
Debt/mortgage statements
Income sources: Social security, pensions, rental, etc...
Develop Your Wealth Management Strategy
About two to three weeks later, we will meet for the strategy meeting. This is where you’ll see the results of your initial plan and we’ll answer questions like:
When can I retire?
When should I take social security?
Will I be able to maintain my lifestyle in retirement?
What should I do not to prepare for retirement?
Believe it or not, this is a fun and interactive conversation where you will be able to visualize your financial life going forward and what needs to happen to get you there.
For our process, the discovery and strategy phase are at no cost to you. This allows both of us adequate time to learn more about each other to determine if it makes sense for us to be your wealth manager.
Implementation and Monitoring
Should you decide to move forward, the next step is to implement your plan. This is when we will establish accounts, transfer your assets to your new accounts at an independent custodian such as Charles Schwab or Fidelity, implement your portfolio, and provide you access to your new client portal.
The final step is to schedule our regular reviews where we will proactively reach out to meet with you twice a year. Through our wealth management process, you will enjoy continuous planning to keep you on track and monitor your progress, tax planning to reduce your taxes over time, and investment management to help you grow, preserve, and utilize your savings and investments over time.
Like I side earlier, every advisor will have a different process. The most important component is that they have a well oiled process that has been refined over time. After all, you want a great experience.
Selecting the Right Wealth Manager
Key Factors to Consider
Credentials and experience
Fee structure and transparency
Investment philosophy
Communication style and frequency
Available services and resources
Questions to Ask Potential Wealth Managers
What is your approach to wealth management?
How do you get paid?
What types of clients do you typically work with?
How often will we meet and communicate?
What resources do you have available to serve clients?
FAQs
How much money do I need to work with a wealth manager?
Most wealth managers have minimum investment requirements ranging from $500,000 to several million dollars, depending on the firm. At Covenant Wealth Advisors, we typically work with clients who have $1 million or more in investable assets. These clients often include high-net-worth and ultra-high-net-worth individuals who require specialized financial services tailored to their unique needs.
How often should I meet with my wealth manager?
Most clients meet with their wealth manager quarterly, with additional meetings as needed for specific planning opportunities or concerns. Regular communication helps ensure your strategy stays aligned with your changing needs and market conditions.
What fees do wealth managers typically charge?
Wealth management fees usually range from 0.50% to 1.50% of assets under management annually, depending on portfolio size and services provided. Some managers may charge additional fees for specific services or planning projects.
How do I know if I need a wealth manager?
Consider working with a wealth manager if you have complex financial needs, significant assets to protect and grow, or want comprehensive financial planning that goes beyond basic investment management.
Conclusion
The role of a wealth manager extends far beyond traditional investment advice, encompassing comprehensive financial planning, tax strategy, estate planning, and risk management.
By serving as your personal financial quarterback, a qualified wealth manager can help you navigate complex financial decisions while working to protect and grow your wealth for generations to come.
The wealth management industry is experiencing significant growth and evolving dynamics, driven by trends such as digital transformation, client-centric approaches, and low cost investing via ETFs.
As financial markets and regulations continue to evolve, having a trusted wealth manager by your side becomes increasingly valuable.
They can help you adapt to changing conditions while keeping your long-term financial goals in focus.
Would you like to see how our team of wealth managers can help you and your family?
About the author:
Senior Financial Advisor
Adam is a Senior Financial Advisor with Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 17 years of experience in the financial services industry in the areas of financial planning for retirement, tax planning, and investment management.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.