Its no wonder so many people are confused about the differences between financial advisers, wealth managers, investment managers, brokers and insurance agents. Virtually anyone can set up shop and call themselves by any one – or all – of these names.
True wealth managers share a number of common characteristics. The overarching concern, above all, is putting the interest of the client first and establishing a long-term relationship based on trust and management of a client’s entire financial picture, not just one aspect of it.
As a wealth manager for independent, divorced and widowed women, I value the relationships I’ve built with my clients. Here’s my take on what it means to be a true wealth manager as opposed to a manager of investment returns, insurance or any one sliver of a woman’s financial situation.
1. True wealth managers evaluate the entire financial picture: This includes assets, liabilities, goals, appetite for risk, need for current income and future financial issues such as retirement. It’s impossible to plan for the future without knowing where you are today or by over-focusing on one particular area of finances such as investments.
2. True wealth managers consider funding goals rather than mere asset allocation: The obsession with asset allocation – how investments are broken into assets such as stocks, bonds, cash, commodities and real estate – has led too many financial advisors to ignore the bigger picture question. That question is whether a specific individual – you – is sufficiently funding a retirement plan, a college savings plan, an emergency fund or whatever goal it is to meet that goal, or not. The way to measure whether that goal is being met or can be met in the future is by whether there will be enough to withdraw over a period of time to fund that objective. Once that question is answered, the asset allocation question can be tackled and the answers will be more evident.
3. True wealth managers don’t try to outperform the market: Any investment managers that outperform the market eventually find out that they can’t continue to do so on a long-term basis. Rather than fight the market, true wealth managers use efficient indexing vehicles to gain market returns for their clients and use probability analysis to "stress test" future investment returns in their projections and financial plans. If markets plunge and reduce the earning potential of a portfolio, the true wealth manager can adjust the asset allocation, advise the client to contribute more or reduce withdrawal options on the other end.
These are only a few characteristics of a true wealth manager. Above all, for me, it’s about building a long-term relationship based on mutual respect and communication. I have special empathy for independent women, as the son of parents who divorced later in life. If you’re interested in learning more, feel free to contact me at Wealthcare for Women to set up an exploratory conversation.
This information does not constitute a personal recommendation or take into account the particular investment objectives, financial situations or needs of individual clients. Past performance does not guarantee future results. Wealthcare Capital Management's disclosure document ADV Part 2A can be found here.