You see the ads all the time. People in well-tailored suits catering to other well-dressed successful people. They would have you believe that wealth management is just for the affluent. In fact, most private wealth managers only deal with accredited investors. These are individuals with at least $2 million in net worth. If you have less than that they won’t even talk to you.
No surprise here… at CSH we think about wealth management a bit differently. And we think the concepts of wealth management should be made available to a much wider range of people.
Keep reading to get our take on why more people actually need wealth management.
What Exactly is Wealth Management?
Typically the term is applied to families who have already accumulated a lot of assets. They’ve attained a level of success that may not be millions but could be substantial. Maybe they have a family farm or business. Maybe they’ve amassed multiple retirement plans that could complicate distributions and taxes. Oftentimes we see situations where a family’s net worth is tied to only one or two assets. It could be a business or real estate. These people don’t need a broker to just sell them stuff, they need an experienced guide. More importantly – they need a strategy. This is where a wealth manager can come in.
A good wealth manager should work with you to understand your goals and risk tolerance while taking into account the big picture and how all those moving parts may impact each other.
5 Things That Make a Good Wealth Advisor
We think a good wealth advisor should have the following:
- Know how to properly position and size assets.
- Act as an advisor and mentor when someone comes into money.
- Possess extensive tax knowledge.
- Be able to recognize tax loss harvesting opportunities.
- A willingness to discuss, and be transparent about, fees.
So what does all of this really mean? Keep reading for more specific examples of how the above things can benefit you.
What Does a Good Wealth Advisor Do?
A good wealth advisor knows how to properly position and size certain assets such as stocks. You and your family might have unique risks. For example, if I’m in the real estate development business I might not want to own stocks having to do with my day-to-day job. In a downturn, the last thing you need is for your business to halt and your stocks to tank at the same time. A good wealth advisor knows how to invest in assets not correlated to your business.
A good wealth manager can act as an advisor and mentor to someone who has recently come into new money. Maybe you’ve inherited a business or a large investment account. Maybe they’ve lost a spouse who previously handled the couple’s finances. Let’s face it, if you’ve lost your spouse rather abruptly, you may not be thinking clearly. Many people in that situation just need someone to bounce ideas off of or share thoughts with.
That’s where a fiduciary advisor or wealth manager comes in. (A fiduciary can work with you on a fee basis and is not conflicted or biased to sell assets or sell high commission products.) Top-notch advisors know how to manage around new large assets for income. They can come up with gifting or sales strategies to maximize distributions to recipients while minimizing taxes. They understand the significance and how to structure intra-family transactions
A good wealth manager also has extensive tax knowledge. If you are dealing with a trust or estate there could be certain benefits to managing the trust income. For example, one recent client lost her husband prematurely. With two school-age children at home, she qualified for special filing status and additional tax credits. Taking distributions from her new trust would have disqualified her from some of these tax benefits. We were able to use insurance funds for some expenses and deferred distributions to a later date. She saved tax dollars and had ample liquidity to pay her bills.
A good wealth manager will recognize tax loss harvesting opportunities. This is a strategy where investments with losses can be sold and replaced with maybe similar assets with the same characteristics.
A good wealth manager should be cost-sensitive and transparent about fees. In my view, hidden fees are the bane of the industry. Retail brokerage firms routinely receive kickbacks or cost-sharing agreements with mutual fund companies. Brokers are paid via convoluted commission structures that are so difficult to understand not even the people who represent these companies can explain them. Most good wealth managers work on a strictly fee basis. This reduces conflicts of interest. A good wealth manager won’t be sensitive or defensive about you asking, “How much will this cost?” It should be stated in the contract that you have with them.
How CSH Views Wealth Management Differently
While wealth management has historically been the domain of the well-heeled, over the years it has become apparent to us that people of modest means can have complicated financial situations that can benefit from the practice of wealth management.
At CSH we offer wealth management services to all of our clients. With over 50 combined years in the tax business, we can help with estate and trust situations – and you don’t have to have millions for us to talk to you.
We can customize a strategy to fit your needs so you can make informed decisions. We want to be your partner, not some “advisor” whom you’re afraid of or hesitant to call.