Wealth Manager

Wealth management encompasses almost all aspects of personal financial services. It can be provided by investment managers, insurance professionals, accountants, bankers, attorneys, and financial planners. The appropriate advisor depends on your needs and circumstances and their complimentary level of expertise and experience.

Wealth management generally refers to the more sophisticated and advanced strategies and implementation vehicles needed by those generally referred to as HNW (high net worth) individuals. Because the needs of HNW persons are varied and complex, the term covers a myriad of disciplines and specialties, including ongoing personalized planning, tax and investment services, as well as occasional transactional and shorter term implementations.

Certainly, as an owner of a middle market business, you are considered, for better or worse, HNW. Certainly, your business is a financial asset. Certainly, your ownership of a closely held concern necessitates the entire spectrum of sophisticated tax and personal planning with carefully monitored implementation to confidently reach financial security and maintain personal wealth.

The Conundrum

Unfortunately, your need as a business owner for sophisticated, integrated financial services and the current financial service industry modes of delivery, training, disposition, and compensation can be at odds and can make finding the right advisor for your circumstances difficult. Unless you are willing to delegate oversight of the process, you will probably find yourself in a continual search for the next level of sophistication or additional levels of service as your circumstances and needs change. This is time consuming, expensive and often less than satisfying. Your personal financial growth like your business growth is a learning process.

The following descriptions attempt to provide a basic guide to the who, what, how, and where of personal finance for the business owning family. There exists no perfect solution until you reach the point at which you can institutionalize the administration of your personal assets in the same manner as you have your business, that is, by the establishment of a family office that you staff and directly control. This becomes practical only when your intergenerational worth exceeds $50 million. Until then, here are some facts that you, as a prospective client, should take into consideration. Knowledgeable, client-orientated, caring and professional providers inhabit every mode of delivery and type of firm. The challenge is to find those whose interests, expertise and experience will be of greatest value to you and yours.

Basic Types of Wealth Management Services

Financial Planning
Personal financial planning is the process for creating a coordinated roadmap for reaching personal wealth goals. At its best, it is written, detailed and shared among an advisory team and personal stakeholders, modified and monitored over time. It integrates insurance, employee benefits, investment, securities, income, gift, transfer and estate tax analyses with strategies and techniques toward the achievement of quantified financial objectives. It is paramount that where a closely held business is involved the fluctuations in business value, the balancing of business and personal cash needs and business transition objectives be carefully coordinated with the personal plan.

Investment Management
Investment managers or asset managers employ various iterations of modern portfolio theory to meet client stated investment objectives while taking risk tolerance, cash needs and life expectancy of the portfolio into account. Typical portfolios limit their investments to publicly traded securities, while others take into consideration, more illiquid alternative investments.

Managers can work on either a discretionary basis, in which case, the client relies on the manager for day to day investment decisions. Non-discretionary accounts are also available where the client receives advice from the manager, but must permit or decline that advice.

Most assets mangers are generalists who amalgamate investments within predetermined general assets classes. Within this group, some aggregate among mutual fund type investment and are referred to as a “manager of managers”. Others trade individual issues within various assets classes. Still others limit their efforts in one asset class and provide investment expertise to large and institutional investors or as part of a manager of managers arrangement.

Each has its place and your choice will depend in part on how much detail you would like about your investments, how much participation you wish to have in the decisions, how much time you have to devote to the process, and whether your interest lies primarily in individual stocks and bonds or in the expertise of the persons managing the selection and trading of those securities.

The Process

Wealth management services are regulated by various state and Federal agencies who mandate “Know thy client/customer”. This is accomplished through application of an information exchange between the professional and the client or customer. Some or all of the following steps are employed to that end whether for asset or money management purposes, the identification of a specific investment or insurance vehicle, a modular planning exercise such as quantifying the tax ramifications of a business sale, or for the ongoing development and monitoring of your entire financial plan.

Identify goals or purpose
Initially, you will be asked to share your objectives and expected results for engaging a professional. What are your needs, what do you hope to accomplish, and where do you hope to be within the foreseeable future. The more clearly you can articulate your requirements the better. It then becomes the task of the advisor to quantify those statements and determine whether they are realistic and what his role will be in assisting in their fruition. To accomplish this, he will be required to

Gather data
You will be asked for basic information such as age, family configuration, education, citizenship, assets and liabilities, through in depth discussion about experience with various investment vehicles, attitudes towards risk and loss, tax status, and lifestyle.

Analyze and evaluate financial status
The data will then be organized into a personal financial profile or snapshot and balanced with your quantified goals to identify where you stand now and what you can expect to accomplish over what period of time.

Develop a plan
The advisor will then present a plan ranging from a single strategy or process to a written, integrated, multifaceted roadmap for reaching your objectives with specific actions and timeline identified.

Implement a plan
Specific actions and placement of appropriate vehicles give the planning process life and set you on a structured path towards accomplishment. The most sophisticated plan is of little value unless it is implemented through the placement of insurance, investments, legal documents, and ownership transfers.

Monitor progress and make modifications
Periodic reevaluation of the plan is necessary to ensure satisfying results. Timely adjustments made as the actual performance of implementation vehicles are compared to the projected results of the initial plan and as your circumstances, goals, and the economic environment change keep you and your advisors on track, organized, and committed. All implementation requires maintenance, ongoing diligence and periodic modification for best effect. The challenge here often lies in the transactional nature of implementation placement whether estate planning documents, investments, or insurance. Providers tend to move to new projects and may forget existing placements if not prompted either by their internal processes or by periodic client inquiry.

By Their Credentials You Will Know Them

Some common credentials, licenses, and designations associated with wealth management help you, the prospective client, recognize the predisposition of the advisor. As you encounter more seasoned advisors, their experience will take precedence over the letters behind their name.

Attorneys (LLB/JD)
Attorneys are state licensed to facilitate all legal transactions and represent clients in courts of law, so their training is at once extremely broad and deep. After they complete their academic training and pass state licensing examinations, attorneys usually develop special area of practice to remain current, competent and relevant in an ever changing statutory and regulatory environment. Estate planning attorneys are an important part of every business owner’s personal planning. The properly prepared personal legal documents coordinated with your business planning and contracts provide important protections. Like many other professionals, no one attorney can serve all of your needs.

Certified Public Accountant (CPA)
This designation was originally created to license persons to attest to the validity of financial statements. The training encompasses all aspects of business accounting, tax and financial record keeping and advice. Although most CPAs concentrate on the commercial aspect of financial advice, many are adept at integrating business owner’s personal and business circumstances to great advantage and are often the first place entrepreneurs look for personal advice. Some also hold a CPA/PFS (Personal Financial Services) which supplements their commercial expertise with personal planning training. CPAs do not, however, readily help with specific investment or insurance implementation or proactively make constructive suggestions. They also can be overly conservative when faced with strategies unfamiliar to them. They can, however, be a valuable bridge among your advisory team.

Certified Financial Planner (CFP)
Persons with this designation have completed a rigorous survey course covering risk management and insurance, personal income tax, estate planning, employee benefits planning, investments and securities, education funding, retirement planning, and consultative communication, really all the areas needed to achieve personal financial independence outside of entrepreneurship.

The CFP designation primarily concentrates on the employee, rather than the business owner, so these professionals sometimes lack appreciation for the illiquidity and inherent risk involved with business ownership. A frank conversation regarding the advisor’s own experience in business can be revealing. Empathy for the sometimes volatile nature of business value, the challenges with management, partners, investors and family, and the need for careful balance between the cash and capital needs of the business and those of the owner can only be a plus.

Certified Financial Analyst (CFA)
The CFA Program is a globally recognized, graduate level curriculum that provides a strong foundation of public market investment analysis and portfolio management skills. Typically advisors with the CFA designation concentrate on management of classes of investments, the diversified allocation of assets, balancing investment classifications and choosing the most effective and profitable individual investments in each category, that is, they are the consummate technicians of asset and investment management.

Chartered Financial Consultant (ChFC)
This is the insurance industry’s version of the CFP designation and includes comparable training with a greater emphasis on risk management and insurance. CFP certifcants are more likely to be licensed and conversant in securities where as ChFCs will likely insurance licensed and orientated.

Chartered Life Underwriter (CLU)
The CLU® is widely considered to be the most respected insurance designation in the industry and demonstrates deep training in life insurance with all its sophisticated applications for both business and estate planning.

Licensing and Registration
Some investment and insurance products are only available on a commission basis. Therefore, in addition to their professional designations, many wealth managers are licensed through Federal and state regulatory agencies to provide insurance and investment vehicles in order to either share in the product compensation or deliver a wider range of implementation alternatives. The Securities and Exchange Commission and its implementation arm, FINRA, oversee securities orientated licensing and National Association of Insurance Commissioners and individual state agencies oversee insurance orientated licensing.

Registered Investment Adviser/Investment Adviser Representative (RIA/IAR)
In order to provide investment or financial planning advice, wealth managers must be directly or indirectly registered with either the Securities and Exchange Commission (SEC) or their individual state, depending upon the level of assets the adviser has under management. Accountants and attorneys are exempt from the registration if the financial advice they give is ancillary to their professional services. Registered investment advisers (RIAs) and investment adviser representatives (IARs) are required to provide you with a detailed disclosure document (ADR) when providing or proposing services. These are also available on the internet and can be used to research and compare firm services.

An important nuance is the difference between the advisor and adviser. Advisor spelled with an “o” is a general term for anyone giving advice whereas adviser spelled with an “e” is very specific term for a fiduciary created by the Investment Act of 1940.

The above is only a sampling of the disciplines involved in personal wealth management. Any advisor you are considering should have a general knowledge of both personal financial and business principles and a healthy respect and cooperative attitude towards other specialties. Otherwise, you will find yourself acting as referee and forced to rely on limited information to make decisions. You would do well to avoid even the most seasoned, credentialed advisor who feels they provide everything a client might need or that their specialty is the only solution to every situation.

Compensation Can Be a Clue

Advisors are compensated in a variety of ways which can have an impact on the amount of attention you receive and the motivation for the types of suggestions or services you are offered. Most advisors no matter their mode of compensation consider the client’s best interest first when they accept a project. Unfortunately, there are some inherent conflicts of interest and barriers to entry built into the way many advisors are paid.

Fee Only
CPAs, attorneys, and other advisors charge on an hourly, flat project or retainer basis. This mode of compensation facilitates objectivity, but can become costly where the specific parameters and time limits of the engagement are not clearly agreed upon in writing. It is often difficult estimate the time any plan might take, so project based fees are usually preferable to hourly. “Fee-only” is also used when referring to percentage or performance based fees where the amount of advisor compensation is based on the amount of assets they manage. Therefore, the advisor may be predisposed to retain or obtain control or discretion over assets that could be employed elsewhere, such as for business growth or debt liquidation. A clear understanding in writing of how fees will be calculated, how and when they will be paid and what you will receive in return should be obtained before engaging any service.

Commission Only
Where an advisor can only receive commissions on the products he sells, a financial plan may be prepared gratis in exchange for the opportunity to present the appropriate insurance or investment products or services. The plan may be quite comprehensive or might address only partial solutions and be used to illustrate your “suitability” (age, health, level of income, net worth and risk tolerance) for the product. If you have the time and limited objective or stated financial goals, such as funding a retirement plan or deferring tax on savings or protecting your family in the event of your demise or disability, this can be a very effective approach. Conscientious practitioners believe in their product offerings and are very knowledgeable in techniques and strategies for tax and expense savings. Many products, particularly insurance and alternative investments, are only available through commission based offerings.

Fee and Commission Based
You may have gathered from prior discussion that planning and implementation are necessary for best effect. Each takes a separate skill set and time commitment to be properly completed and serviced. Currently, only licensed dealers in some investment and insurance products have access to all information regarding the product construction, compensation/fee structure and company customer service. Where you expect objective advice and well serviced implementation delivered seamlessly, compensating through both fee and commission might be the most time and trouble free way to pay for financial services. This mode of compensation is sometimes referred to as “fee-based”.

Banks, trust companies, some ensemble planning firms compensate their advisors through salary and bonus arrangements. When one’s objectives are in line with that of the employing firm, the services obtained from these providers can be cost effective, objective and integrated with other advisors. The caveat here might be that salaried individuals may have little empathy for the challenges of business ownership.

Every mode of compensation contains potential conflicts of interest. These should be disclosed to you either in a proposed letter of engagement or in the volumes of paperwork necessary engage in any financial transaction. Additionally, every advisor, being human, has his prejudices and predispositions.

Any advisors you may be considering should have a general knowledge of financial principles and a healthy respect for specialties in which they do not engage. This general knowledge can be both a blessing and a curse, because seasoned advisors often feel they can provide everything needed for the client’s best results or that their specialty is the only solution to every situation.


The actions necessary to grow your personal net worth are very similar to those of your business growth. In order for either to increase in value, you must defer to managers and team members to assist in determining the best use of people, capital and time to reach your desired results. Finding the right people and resources is time consuming, sometimes fraught with confusion and generally not your first priority until matters reach a critical stage. Unfortunately, many do not start to build that team until necessity forces their hand. It is well to start with determining your own needs before looking for assistance from a wealth manager.

If you already have a group of advisors with whom you are comfortable, you may simply wish to augment their services with a sophisticated wealth manager who can implement strategies already in place or grow assets outside of the business. If your current advisors depend on you to coordinate their efforts, you should look for a generalist who can act on your behalf to get their individual services integrated, maintained and augmented by others as needed.  This generalist fills the same type of function as your primary care physician. You expect your doctor to maintain your optimum good health and treat any specific challenges beyond his expertise with referrals to specialists who diagnose and prescribe remedies. Your primary doctor’s main function is then to coordinate all your health providers, medications, and remedies to reach the best coordinated result. This primary resource might be an internist, a cardiologist or a general practitioner, but his primary service to you is communicator and translator.

Likewise, your primary personal advisor might be your accountant, your attorney or your financial planner, but his primary use is as coordinator, communicator and translator among the different disciplines needed to maintain your personal financial well being. Just like your medical concerns, you may initially take on this lead task yourself, but as your circumstances and their solutions more complex, you should abdicate to the more concentrated efforts of a knowledgeable, trusted professional.

If you are still identifying your team of personal advisors, you may wish to find a generalist with a wide group of contacts and collaborators to first help structure a plan and manage implementation as well as introduce you to special service providers as needed. Ideally, we would like a group of advisors on whom we could confidently call as needed and who would not seek to impose their opinions and product on us without our initiating the process. Therefore, it is common that most of us have accumulated many stand alone resolutions to various problems. Catastrophe insurance (life, medical, disability, liability) against worst case occurrences, retirement plan investments to defer taxes, provide for future cash flow and accumulate personal wealth, real estate to house our enterprise or diversify personal investment, collectibles, and business interests.

In the end, you must realistically evaluate your interests, strengths and needs to determine what you will do yourself and what you must delegate, whether you will coordinate a group of siloed advisors or engage a generalist to facilitate the integration.

By Teresa Cherry, CPA, CFP, CM&AA
The Family Wealth Collective