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- Private wealth management is a type of financial planning and asset management for high-net-worth individuals.
- Private wealth managers provide a wide range of financial planning, wealth-building, and other services through a bank, brokerage, or firm.
- Managers offer personalized advice and customized financial planning depending on your risk tolerance and time horizon.
As your wealth grows, your individual or family financial situation may become too complicated for you to handle on your own. A standard financial plan may not cut it anymore for your unique circ*mstances. You're likely in need of ongoing guidance from a specialized financial expert.
Here's how a private wealth management can help high-net-worth investors protect their wealth, manage their investment portfolio, and provide customized financial advice.
What is private wealth management?
Similar to regular asset management, private wealth management is the business of managing assets and providing financial planning services to clients. But private wealth managers tend to mainly work with high-net-worth individuals (usually someone with at least $2 million in investable assets).
Private wealth managers work with high-net-worth individuals because they often have more complex finances, invest in more lucrative asset classes, and require more hands-on management tactics. Private wealth managers are technically employed by independent firms or banks.
They also have expertise in certain areas, such as financial planning, asset and cash management, investment tools, estate planning, and tax advice. Depending on a client's risk tolerance and time horizon, private wealth managers offer personalized advice and guidance.
These managers may also sell proprietary and nonproprietary investment products and services.
"Proprietary investment products are investment vehicles that are issued and managed by the same institutions that are advising clients on their investments," says Angie Spielman, founding partner and financial advisor at Manhattan West.
Some private wealth management companies provide clients with a team of professional accountants, bankers, and planners for additional financial needs.
How private wealth management works
The point of private wealth management is to give you access to a financial expert for specialized planning and investment management through a customized wealth plan. Whether you're a business owner, executive, or high-income family, your wealth manager works with you and an investment team to design an investment strategy based on your preferences and financial goals.
Private wealth managers are usually either bank-affiliated or independent managers that offer guidance for assets such as:
- Cash
- Equities (such as private equity, home equity, and brand equity)
- Fixed-income (such as corporate bonds or treasury bonds)
- Trusts and estates
- Alternative investments (such as real estate investing with Yieldstreet, orcryptocurrency investing with EToro)
These managers provide ongoing financial services, like private banking and tax advice, as your financial situation changes.
"The frequency of meetings with a private wealth manager is usually guided by the client and their needs. Some clients prefer monthly communications, others quarterly meetings, and others just annual touches," says Spielman.
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Types of private wealth managers
Private wealth managers can have various licenses and certificates, such as licenses for estate planning, tax planning, or to be a fiduciary.
Bank-affiliated private wealth managers
Bank-affiliated private wealth managers are financial experts often employed by large banks, brokerages, or financial institutions. However, private wealth managers tend to be limited to offering investment products and services specific to the institution employing them.
That said, bank-affiliated wealth managers can access certain lending access and other resources faster. They are also more equipped to adapt to new technological advances, such as online services. Online private wealth management is not only a more accessible way to manage your assets but also generally has reduced fees.
Independent private wealth managers
Independent private wealth managers are experts often employed through small firms that are not affiliated with a bank or larger financial institution. These managers provide more personalized services and can recommend a wider variety of products and services.
On the downside, independent private managers don't typically have the same lending access and additional services that bank-affiliated managers have.
How much does private wealth management cost?
Compared to regular certified finanical planners (CFPs) and asset managers, private wealth managers tend to be more expensive. They are usually either fee-based or commission-based, and the actual cost varies by manager. Fee-based managers charge flat fees and often charge clients a percentage of the assets under management (AUM).
For example, Fidelity Private Wealth Management charges a gross advisory fee from 0.50% to 1.04%. To access private wealth management services through Fidelity Investments, you have to have at least $2 million in managed assets.
"Most private wealth managers charge a percentage of assets under management," Spielman says. This fee is typically about 1%."
With commission-based fees, private wealth managers earn money when they buy or sell certain investment products on behalf of their clients, such as mutual funds or annuities that offer higher commissions.
Commission-based fees are losing popularity as it can influence financial planners and finanical advisors to make financial decisions that aren't in the client's best interest. Instead, more folks are inclined to hire fiduciaries that have a legal and ethical obligation to act in their client's best interest.
When looking into a private wealth manager, make sure to ask how they charge and what their fee structure looks like.
Private wealth managers vs. asset managers
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"A private wealth manager advises high-net-worth individuals and families on how to invest portfolios based on specific risk tolerances and investment horizon," says Spielman. "However, in addition to that, they offer services such as portfolio management, estate and tax planning, as well as business management via additional team members."
Spielman explains that traditional asset managers typically limit their scope of advice to investments, rather than to your entire financial picture.
Private wealth management — frequently asked questions (FAQs)
What is the minimum net worth for private wealth management?
You must be a high-net-worth individual to be eligible for private wealth management, which means you usually need a minimum net worth of $2 million.
How much does a private wealth manager cost?
The cost of a private wealth manager varies from manager to manager and depends on their fee structure. But fees from wealth managers tend to be on the higher end. Private wealth managers are usually fee-based but some may be commission-based. Most fee-based managers charge a percentage of assets under management (AUM) which ranges from 1% to 3% based on the size of the account.
Are private wealth managers worth it?
Private wealth managers may be worth it for high-net-worth individuals looking for guidance on managing cash and other investment assets through financial planning and wealth-building strategies. Private wealth managers can be pricey, so if you're not willing to pay higher fees you should consider a certified finanical advisor or planner instead.
What's the difference between wealth management and private wealth management?
Wealth management refers to the practice of providing personalized wealth-building advice, asset management, and more to high-net-worth clients. Private wealth management refers to the practice of wealth management designed specifically for individual clients based on their personal financial situation, goals, and risk tolerance. Compared to general wealth management, private wealth management offers clients more customized advice and hands-on asset management.
How do private wealth managers make money?
Most private wealth managers make money by charging a percentage of the assets under management (AUM). For example, a wealth manager may charge between 1% and 3% of the asset managed. But keep in mind that the larger the account, the higher the fees. Depending on the bank, brokerage, or firm, other private wealth managers make money through hourly fees, annual fees, or commissions.
Is private wealth management right for you?
If you have at least $2 million worth of investable assets and need help managing your investments, a private wealth manager may be right for you. Private wealth management is the practice of guiding and managing cash and other assets for high-net-worth individuals.
Unlike regular asset management, wealth management has a more holistic approach to finances. Plus, private wealth managers tend to have more experience in cash managemnt and long-term wealth building. They also often specialize in additional financial services like tax planning, insurance protection, and estate and trust planning.
But if you don't have at least $2 million worth of assets or don't want to pay the higher fees, a regular finical advisor or finanical planner would be a better option.
Junior Investing Reporter
Tessa Campbell is a Junior Investing Reporter for Personal Finance Insider. She reports on investing-related topics like cryptocurrency, the stock market, and retirement savings accounts. She originally joined the PFI team as a Personal Finance Reviews Fellow in 2022.Her love of books, research, crochet, and coffee enriches her day-to-day life.
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