As experts in women’s wealth, we at Ellevest talk about money and investing all day, every day. We’re fluent, if you will, in finance. But if it’s not your job, getting a handle on all the financial details and jargon and concepts out there can be a bear of a task. Terms that sound so similar — financial advisor, financial planner, wealth manager — are oftentimes used interchangeably. Other times, getting the nuances right really matters — and that’s particularly the case with wealth management, where the stakes can be so high.
We want you to always know exactly what you’re talking about when it comes to wealth, no matter where you are in your financial journey. We also want you to know which services and experts will be the best fit for you and your needs. That’s why we put together this explainer on all things wealth management — what it is, who does it (psst — that includes us), what it costs, whether it’s right for you, and what to look for if it is.
What is wealth management?
Wealth management, broadly defined, describes the set of interconnected financial services used by individuals, families, and organizations to manage their money and reach their financial goals. It’s a comprehensive and holistic approach to financial planning that takes into account your current financial situation, your future goals, your tax posture, your capacity for risk (investing-wise), and more to craft a highly personalized, workable financial strategy.
While it can technically encompass all forms of financial advisory services (including digital investing platforms like Ellevest), the term “wealth management” is more commonly used to describe services best suited for those with a certain level of wealth and / or more complex financial situations and goals (like those offered by Ellevest’s Private Wealth Management team). It’s a detailed and personalized approach to a person, family, or organization’s broad range of ongoing financial needs.
What services are included in wealth management?
Wealth management, as described above, is a combination of different services that work in tandem to serve an overall strategy. These services can range from portfolio management and tax planning to philanthropic giving and estate planning. The first two examples are usually the meat-and-potatoes of the package — keeping a complex portfolio properly diversified, helping clients pursue investments suited for their personal needs and goals, planning for retirement, making sense of complex compensation packages and liquidity events, and ensuring any and all financial moves and goals are tax-optimized each year.
What services are not included in wealth management?
Great, if tricky, question. Since “wealth management” is such a broad term — a “wealth management” team will usually encompass multiple types of professionals at multiple firms, all working with you and each other to manage your financial life — it really depends on what your situation requires.
For example, while financial advisors will often need to collaborate with your attorney(s) and accountants / CPAs to manage your money, the financial advisory part of your wealth management team is typically distinct from the tax and legal services parts. A financial advisor will work with you to understand and guide where your money goes and what it’ll be doing, but things like legal paperwork (establishing trusts, will- and power-of-attorney-drafting, and so on) will typically be the domain of your estate attorney or legal team, and your taxes will be prepared by your accountant / tax attorney / CPA. Your wealth manager (financial advisor) should be able to help you suss out which of those services, documents, etc. you’ll need to establish to properly execute your financial plan — and if you don’t already have the legal or tax support you need to make it happen, they may even be able to refer you to one they’ve worked with.
What are some common strategies for managing wealth?
Again, your personalized strategy (or strategies) will vary dramatically from your neighbors’. However, each overall strategy will be in service of maintaining and continuing to build your wealth over time.
Portfolio rebalancing: Your wealth manager will regularly assess and make changes to your portfolio to ensure your assets remain healthily diversified to continue performing no matter what the markets are doing.
New investment opportunities: Beyond the standard rebalancing that all financial advisors (humans and robo-advisors alike) will do with your various public holdings, a good wealth manager can surface investment opportunities that aren’t available to the public, from private fixed income to emerging alternatives. They’ll have done rigorous due diligence and will be able to explain the opportunities to you in detail and assess whether they might be right for you. (This is one area in which Ellevest Private Wealth Management and our values-driven impact offerings truly shine.)
Tax optimization: A wealth manager will be able to allocate and balance your portfolio assets so as to maximize tax benefits available to you each year, using tax-efficiency, asset location, and tax-loss-harvesting strategies.
Philanthropic planning: Whether they’re allocated regularly to offset tax burdens or earmarked as an estate bequeathment when you’re gone, charitable donations can be an integral part of an overall wealth management plan. Wealth managers can help you engage in philanthropy strategically — for example, they can help you decide among options like donor-advised funds, trusts, or charitable foundations — in a way that’s best for both you and the causes you care about.
Estate/succession planning: We’ve got a whole explainer about what this service is and why it’s important. In a nutshell: A wealth manager can help you think through how to best position your finances to work for you and your loved ones even after you’re gone, working in tandem with your estate attorney to help you get everything in place.
One rarer (though compelling, at least in our view) strategy is portfolio optimization for both returns and impact. Ellevest Private Wealth was built on the belief that women (indeed, all clients) should be able to align their investments with their values without having to sacrifice returns to do so. As wealth managers, we want our clients to be able to make the difference they want to see in the world with their money, through a combination of carefully selected investments, from ESG funds and public equities to fixed-income and private alternatives.
What does a wealth advisor do?
Great question. The services above are a start, but you’re probably asking about the title itself, right? Maybe the day-to-day job? We got you covered.
How are wealth advisors typically certified?
Wealth advisors can be certified by a number of different organizations and bodies, depending on their personal specialties. If you’re looking for specific kinds of expertise, this list of accreditations and titles from FINRA (the Financial Industry Regulatory Authority). Here are a few of the most common designations:
Your wealth advisor may be a CFP® professional, or CERTIFIED FINANCIAL PLANNER™ professional. This means they’ve met the coursework, exam, and extensive work experience requirements outlined by the Certified Financial Planner Board of Standards, Inc.
They may also be a Chartered Financial Analyst®, or CFA® (the organization that offers this certification is creatively called the CFA Institute), which requires more specific education and exams around investing and asset management.
They might also be a CPA, or Certified Public Accountant, a license that comes from the advisor’s state Board of Accountants and the American Institute of Certified Public Accountants. If your wealth advisor is a CPA, they’ll also have been accredited by the AICPA as a Personal Financial Specialists, or PFS,after undergoing additional specialized training.
One caveat: A wealth advisor doesn’t necessarily need to have any of these designations to be a good wealth advisor. The only thing a wealth advisor really needs is to be licensed as an Investment Advisory Representative, or IAR, which requires passing an exam and registering with regulatory organizations. Beyond that, certifications are always a plus, but they don’t have to be a dealbreaker when it comes to finding a wealth management team that can help you achieve your goals.
What do wealth advisors usually NOT do?
As mentioned above, unless your wealth advisor is also a lawyer (and that would be a truly wild amount of education and licensure to fit in one brain, no matter how smart they may be), they’re not going to be able to draw up your will, for example, or file power-of-attorney documents on your behalf. They also can’t offer specific tax advice or do your taxes for you — that’s the purview of tax attorneys, tax preparers, and CPAs.
If they’re worth their salt, they won’t do things like time the market, pick stocks, or allow their clients to end up in concentrated stock positions, either. If you’re looking for those kinds of services (which, if you ask us, are more akin to gambling than investing), you might look to a broker-dealer for that (more on that below).
Who is wealth management best for?
Generally speaking, wealth management is best for folks with a decent number of financial plates spinning. If you don’t already have a wealth advisor, perhaps you recently accumulated a significant amount of money (ie an inheritance, a liquidity event like an IPO, even winning the lottery counts). If that’s you, it might be worth looking into wealth management to make sense of it all. You might also be a good match if your financial situation is complicated (as in, you have a number of different kinds of uncommon accounts, financial plans that need unifying, or a significant amount of your wealth is in a single stock or stock options).
How much money do you need for wealth management to be worth the cost?
Wealth management and financial planning look very, very different depending on how much wealth you need managed and how much guidance you’re looking for. Someone who recently came into $250,000 thanks to their start-up going public will have very different planning needs from someone with $25 million invested in the markets.
At Ellevest, we believe our Private Wealth Management offering is best for investors with a minimum of $1 million to invest (but we have experts who can work with individuals, families, and institutions with much more).
How much does wealth management cost?
Now we’re getting down to brass tacks. While you might pay a typical advisor a flat rate up to a certain point, the cost of wealth management specifically is usually percentage-based, and usually increases as your assets do. (This is one of the reasons it’s best for investors with a decent amount to invest, to make it worth it — you can learn more about that in the “who is wealth management for?” section above.)
How do wealth advisors get paid?
There are multiple ways you’ll end up paying for the services of a wealth advisor or wealth manager (beyond their salary, which is typically paid by their firm). The most common structure is fee-based. Basically, you pay a percentage of the overall value of the assets under management (or AUM) in your portfolio. That may be paid annually or quarterly (or otherwise), depending on your agreement. (This is good for you because your interests are aligned: when you make money, they make money.)
There are other fee structures, of course. Some managers will charge sales-based commissions, or receive incentives for selling certain assets. There may be other fees associated with certain products or investments.
A quick note on those, however. Which kind of wealth manager you go with will depend on your goals. But Ellevest is among those organizations and individuals known as fiduciaries. A fiduciary is an SEC-registered investment advisor that is obligated to act in its clients’ best interests. Here’s a little more about what that means.
The short version: When you work with wealth advisors at a fiduciary, they have a vested interest in helping you make the smartest possible decisions for you, regardless of whether it benefits them — and that includes how they charge you. (That’s as opposed to broker-dealers, who can offer trading accounts in addition to fee-based accounts, and whose standard of care is just that they “must exercise reasonable diligence, care and skill when making a recommendation.”)
If this all sounds like a lot, we get it. But in most cases, outsourcing to a professional — one who has your best interests in mind, who can understand your goals and values act on them — is actually the most cost-effective way to go about managing your financial future. If you’re currently with one who doesn’t get you (you know, the one you inherited, that guy you’d describe as “fine”), it might be time for a re-org.
What to consider when choosing a wealth manager
As we’ve said before, there’s a big, hidden cost associated with sticking with a wealth manager who doesn’t really get you — especially for women, whose needs and lived experiences are regularly ignored by the financial industry. Ellevest was designed by women, for women. Ellevest Private Wealth Management advisors work with clients — individuals, yes, but families and institutions, too — to understand their goals and values and build a bespoke portfolio and holistic, tax-optimized investing strategy to match. Then, we’ll manage your portfolio proactively on an ongoing basis, monitoring and reporting progress against expectations. As the markets, the available set of investments, and those needs and goals change, we’ll adjust and rebalance your portfolio accordingly.
Impact isn’t just a last-minute add-on here, either; it’s a core part of what we do. In addition to those core bespoke portfolios, Private Wealth clients also have access to Ellevest Intentional Impact Portfolios and the Ellevest Climate-Conscious Impact Strategy, which are built with investments that meet our social and environmental criteria — and away from those that fail to meet them. Finally, clients can access an array of best-in-class, impact-focused private alternatives for both financial and social returns. We believe it’s possible to invest to achieve both — and that you don’t have to sacrifice returns when investing to make a difference. (And remember, we’re a fiduciary, which means our wealth managers are legally bound to always act in your best interest.)
(Btw, that belief applies no matter how much you have to invest. Even if wealth management isn’t the right fit, Ellevest’s also offers digital goals-based investing to help clients prioritize their financial future, from retirement and homebuying to family planning. Digital clients also have discounted access to our team of financial planners, as well as workshops and other resources that can help you plan for the future you want — and the life you have. Best of all, you can still invest with your values with Ellevest’s Impact Portfolios.)
Whatever your financial situation, Ellevest is here to help you achieve your goals. If wealth management sounds right for you, get in touch with an Ellevest Private Wealth advisor to see what might be possible. We can’t wait to hear from you!