Our Thoughts about Wealth Management Solutions and Financial Planning in 2024

Chad Holland |

In our view, wealth management is highly commoditized today. Many players offer similar, often cookie-cutter solutions or have business models with distinct limitations. But when you have substantial wealth, these approaches can often backfire, exposing you to higher risk or leaving you missing out on opportunities. This is even more critical in today's uncertain markets. Learn why we believe many of these wealth management solutions no longer serve many investors. More importantly, discover how better options can help you preserve and grow wealth with more confidence.

 

What are Wealth Management Solutions?

 

Wealth management is a general term encompassing a wide range of financial, retirement, and investment strategies tailored to the needs of high-net-worth individuals. Over the past few decades, the industry has undergone significant transformations, evolving from a narrow focus on investment advice to a more holistic approach addressing an individual's entire financial life. 

In the early days, wealth management was often synonymous with stock picking and asset allocation. Financial advisors primarily focus on helping clients choose the right stocks, bonds, or mutual funds. The goal was straightforward: maximize returns while minimizing risk, but the scope was limited. As the financial markets and global economy grew more complex, so did the needs of high-net-worth individuals. They began to realize that managing wealth was not just about picking investments; it was about integrating these investments into a broader financial plan that also included tax, retirement, estate planning, risk management, and even lifestyle considerations.

Technology advancements further accelerated this evolution. With the rise of robo-advisors and sophisticated personal financial software, the industry saw a democratization of financial advice. However, for high-net-worth individuals, this posed a new set of challenges. While technology could handle some of the more straightforward aspects of financial planning, it couldn't replace the nuanced understanding of a client's 360-degree financial picture, which is crucial for effective wealth management.

Today, leading firms deliver a comprehensive suite of services beyond investment advice. While that is generally good news, there's also a problem. Often, these firms are public companies. That means their shareholders are the priority, and client interests can sometimes take a back seat. This business model can create conflicts of interest, making it difficult for wealth managers to provide objective advice, especially when the firm may profit from recommending its own proprietary products.

 

What Financial Solutions Are Popular Today?

 

Today, the wealth management landscape is filled with more solutions, from digital robo-advisors to full-service financial planning. Many firms offer a blend of technology and human expertise, aiming to provide personalized advice at scale.

However, the commoditization of these services often leads to a one-size-fits-all approach, which can be detrimental for those with significant assets.

Or, many firms now attempt to provide individual financial advisors with all the technology to service a stable of client relationships. This one-to-many (one advisor servicing a set amount of clients) platform makes sense, in theory. One person gets to know your entire financial situation. Who better than to help you with all areas of your financial life?

 

Why You Need the Expertise of Specialists, Not Generalists

 

Wealth management is a vast field. No one person can be an expert at investments, financial planning, estate planning, tax planning, and long-term care, etc. Each is a separate specialty area, and it can take one professional tens of thousands of hours to master each subject. What if they try to do everything? As you can see, that’s a generalist, not a specialist.

Take our health care system. In most cases, you go see your primary care specialist. Would you want them to do the surgery if you needed a knee replacement or a kidney transplant? Of course not; that would put you at risk. You would seek out a specialist.

If you're successful, depending upon one person for everything probably means you're working with a generalist. And if the person helping you is not well-versed in a particular topic, that can mean you're missing out on opportunities or higher quality strategies.

 

What Is Important for Wealth Management and Retirement Planning in 2024?

 

We're coming out of a few smooth-sailing decades for equity investments. While that meant easy gains for most, it also likely made many financial advisors and planners look more skilled than they were.

Times have changed. With investors able to park funds in higher interest-rate vehicles, investment managers today need to earn their money.

And if your wealth manager is a generalist, they may not even be able to earn the same as the current interest rates available on money market funds and other low-risk investments. And unfortunately, it's not just lack of return that is an issue. Instead, it's a much more significant concern…preservation of capital.

 

What Is an Example of a Wealth Management Solution that Will Work in 2024?

 

No one has a crystal ball. But after a few decades of easy stock market returns, we firmly believe that rising inflation and interest rates have changed the landscape for the foreseeable future. While there's still room for gains, most investors are unwilling to risk significant losses.

We strongly believe that if you have assets to protect, you need a wealth management solution that equally balances priorities. In most cases, you will want the advisor to strive to protect your assets in volatile markets while also striving to achieve growth.

Especially if you're planning to retire anytime soon, you want to be sure to partner with an advisory team that is best suited to manage today's risk.

Along with including defensive as well as offensive investing tactics, that means finding strategies to lower your taxes with sound tax and estate planning strategies. However, not all wealth management solutions offer those more sophisticated approaches. And indeed, most generalist financial advisors and planners cannot usually provide that targeted expertise.

It also means that you will likely be best served by a team approach, where one financial advisor acts as your "quarterback" but then brings specialists to help you go deeper in certain areas.

 

FREQUENTLY ASKED QUESTIONS ABOUT WEALTH MANAGEMENT SOLUTIONS

What Is Wealth Management in Simple Terms?

 

Wealth management is the art and science of growing, preserving, and transferring wealth. It usually involves a more holistic approach to financial planning, investment management, tax planning, estate planning, and even philanthropy.

But all too often, most strategies employed are offensive. There is usually less attention paid to defense. When your money is at stake, be sure to ask a potential wealth manager exactly how they will manage risk for you.

 

What Do Wealth Management Services Do for Me as a Client?

 

Wealth management services strive to provide a comprehensive solution for managing an individual's or family's finances. This often includes investment advice, tax planning, estate planning, risk management, and retirement planning.

The goal is to grow and preserve wealth while minimizing risks and tax liabilities. However, you must find out how the firm's business model works to ensure it is aligned with your goals.

 

What Are Some Wealth Management Services?

 

Some of the core services include:

  • Investment Management

  • Financial Planning

  • Tax Planning

  • Estate Planning

  • Risk Management

  • Retirement Planning

  • Philanthropic Planning

Better wealth management solutions providers also tend to provide other services such as:

  • Trust Administraiton

  • College Planning

  • Access to Financing

 

How Much Money Should You Have for a Wealth Manager?

 

There's no hard and fast rule, but generally, you should have at least $1 million in investable assets to make the most of a wealth manager's insight and capabilities. Some firms even specialize in ultra-high-net-worth individuals, typically defined as those with $30 million or more in investable assets.

 

Is It Worth Paying for Wealth Management?

 

If you have significant assets, the answer is likely yes. A good wealth manager can provide value far beyond the fees they charge, especially regarding tax planning and risk management. They can help you navigate the complexities of the financial world and help you protect what you've worked so hard to build.

Keep in mind that generalist versus specialist issue. If you only work with one individual, you will be limited by their expertise. A better model is usually one where you have a central wealth manager who manages your overall financial plan but then pulls in specialists as needed so you can get the expertise you need.

 

What Are the Top 5 Wealth Management Companies?

 

While the "best" is subjective and depends on individual needs, some of the biggest players in the industry are:

  1. UBS Wealth Management

  2. Morgan Stanley

  3. Bank of America Global Wealth & Investment Management

  4. Wells Fargo Private Bank

  5. Goldman Sachs Private Wealth Management

Some of these firms have a specific focus, which is often investment advisory. Keep in mind that these are large, publicly held companies with big marketing budgets to keep their brand a household name. Before you consider a firm like this, it is best to learn about its business model. Often, these brand-name wealth manager employees have a fiduciary duty to another party, their shareholders, and not necessarily to you. Their business model may include selling proprietary products, such as mutual funds or life insurance. As a client, you should be careful to ensure that you are getting objective advice, not just product recommendations.

Additionally, dealing with these massive firms can often be a source of confusion. For example, you may think you are dealing with their bank when in reality you are interacting with a separate, non-affiliated brokerage firm. This can also confuse the fiduciary issue. In this case, if you're working with a bank's trust department, they are usually required to act as your fiduciary. However, if you're also working with their brokerage, they are not usually required to do so.

 

What Credentials Should I Look for in a Wealth Manager?

 

When it comes to managing your assets and creating a secure future, the credentials of your wealth manager can make a significant difference. Not all financial advisors are created equal. The proper credentials show the advisor has invested years into acquiring the needed knowledge and skills. Consequently, these are valuable ways to evaluate expertise and training. 

At firms like Holland Capital Management, you work directly with a seasoned, highly credentialed professional who coordinates a team of specialists to meet your needs. This approach minimizes your financial blind spots and helps you maximize your resources. 

Credentials are not just letters after a name; they signify a level of expertise and a commitment to ethical conduct that can be crucial for effective wealth management.

One of the most respected credentials in the industry is the Chartered Financial Analyst® or CFA. This designation is often regarded as one of the most challenging to attain. It signifies a high level of expertise in investment analysis. A CFA charter holder is trained to provide in-depth analysis, offering a more nuanced and data-driven approach to investing your money.

On the financial planning side, looking for advisors who are CERTIFIED FINANCIAL PLANNER™ professionals is wise. The CFP® credential indicates that the advisor has dedicated time to extensive training in tax, estate, and retirement planning. Along with significant work to earn the certification, these professionals must meet continuing education requirements, which helps ensure the advice you get is up to date with current regulations and best practices.

 

Can a Wealth Manager Help Me with Other Challenges, Like Debt or a Trust?

 

Yes, the full-service approach of these professionals means you can get help with other financial goals, such as reducing or refinancing debt. Or, you may want them to help you address asset protection or estate planning goals. In that case, they may help you set up and manage a trust. With all of these more advanced services, it is important that they also help you understand these strategies, which can help you feel more confident.

A good wealth manager or financial planner can also help you with preparing financially for life transitions such as marriage or divorce. Or, for business owners, you may want help with business financial decisions, such as the choice of a corporation or an LLC.

 

Which Wealth Management Company Has the Best Returns?

 

It's difficult to pinpoint a single firm with the "best" returns as performance can vary based on numerous factors, including market conditions and individual client needs. However, of course, performance is still critical. One way to ensure you get a transparent and accurate picture of a wealth management firm's performance is to check if they comply with Global Investment Performance Standards (GIPS®). GIPS® is a set of standardized, industry-wide ethical principles that provide guidelines for calculating and presenting investment results. Compliance with GIPS® ensures that the performance data you see is transparent and comparable across firms, giving you a more accurate report of a wealth manager's capabilities.

GIPS® compliance is critical if you are a high-net-worth investor with a complex portfolio. Additionally, when a wealth management firm is GIPS®-compliant, it signifies their commitment to providing complete and fairly represented information, allowing you to make more informed decisions.

 

What Other Ways Should You Evaluate Wealth Managers?

 

While returns are undoubtedly significant, they should not be the sole criterion for evaluating a wealth management firm. A more holistic approach considers how well the firm manages risks and optimizes for tax efficiency. A wealth manager who excels in these areas can add significant value, helping you not only grow but also sustainably preserve your wealth.

Also, it is important to find out how the professional will keep you updated as a client. Will you get a reporting platform you can access from any web browser, so you can stay up to date? Also how quickly do they respond to email or return phone calls? Don't discount this aspect; if you're undergoing any life changes and have difficulty getting prompt responses, you may feel frustrated. Usually, it's best to find a team that you feel comfortable with, so you'll feel welcome to bring them concerns and questions.

 

What Are the Disadvantages of Wealth Management?

 

Wealth management offered by a high-quality firm can provide numerous benefits. However, as with any investment offering, there will always be some potential drawbacks to keep in mind: 

  • Higher Fees: Better quality advice often comes at a premium, which may impact your after-tax returns, so just keep an eye on this to make sure you're receiving value. 

  • Complexity: The range of services offered can, at times, be overwhelming, which means you should look for a firm that offers to keep everything organized for you and assists with implementation.

  • Potential Conflicts of Interest: Not all advisors are fiduciaries, meaning they may not be legally required to always put your interests before theirs. Ideally, steer clear of any firm that will not agree in writing to act as your legal fiduciary.

On the other hand, making the right choice can provide peace of mind that your savings are being managed prudently and thoughtfully.

 

Conclusion

 

With recent changes in the economic landscape, wealth management in 2024 needs to be different to have the best chance of success. The commoditized, one-size-fits-all approach is not enough when your net worth is on the line. Instead, you should demand more. Look for firms that recognize the importance of preservation and offer a team of specialists to meet your needs, ensuring that you get objective advice tailored to your unique situation.