What is Wealth Management?

Recently, I was interviewed by Jeff Plungis, of Bloomberg News, about the status of UBS and other major banks, regarding their "wealth management" offerings.  You can read the story on bloomberg.com, including my quote near the end.

The process confirmed to me that few really know what wealth management means.  As a result, many firms and advisors are saying that they offer wealth management services when, in fact, they do not!  One research paper found that 78% of advisors describe themselves as wealth managers, but only 8% actually perform true wealth management (Source:  Russ Alan Prince and David A. Geracioti, Cultivating the Middle Class Millionaire, 2005).

So, what is true wealth management?  I have a simple formula:

Wealth Management = Investment Management + Advanced Planning + Relationship Management; provided in a cohesive, holistic manner.

Most firms provide the Investment Management piece.  Where they fail is the Advanced Planning and Relationship Management part.  What do these pieces mean?

Another formula:  Advanced Planning = Wealth Enhancement (advanced income tax planning, current and future) + Wealth Transfer (estate tax planning and transfer strategies) + Wealth Protection + Charitable Gifting.

Relationship Management is the process of coordinating, managing and monitoring a team of experts to analyze, recommend and implement the advanced planning strategies.  The Wealth Manager acts as the quarterback for the team of experts.

True wealth management is really a type of family office service.  What the banks, brokerage firms and many of the trust companies are trying to do is up-market their brokerage business.  Quite simply they do not have the capabilities to provide these services.  I won't even get into the huge conflicts of interest these institutions bring to the process!