You will often hear the term wealth management, which tends to be associated with relatively high net-worth individuals. At first glance, it is not automatically clear what services a wealth management company would offer. However, if you dig a little deeper, this industry provides a vast range of services.
However, before we look any further, it is essential to appreciate that wealth management is as much about protecting wealth as it is about building wealth.
Investment management and advice
Wealth management companies are best known for investment management services, both advisory and discretionary. Established wealth management companies tend to be well-connected, which opens more investment opportunities for their clients. While listed investments are the most popular, many larger wealth management companies can open doors to private equity and similar types of investment.
Comprehensive financial planning
Many wealth management companies use cash flow software to predict (in theory) future investment returns and income streams. A comprehensive financial plan might include the best and worst-case scenarios to give you an idea of potential returns in the future. In some instances, this may prompt you to change, for example, your pension fund contributions to meet your retirement target.
Tax planning and accounting services
It is unfortunate, but many people address the subject of tax planning and accounting services far too late in their life. It is never too early to start planning for the future, using tax-efficient vehicles and allowances. One of the primary roles of a wealth management company is to make you aware of allowances and tax-efficient vehicles and how they can be integrated into your long-term investment planning. These benefits may seem relatively minor in isolation, but over 20, 30 or even 40 years, they can significantly enhance your returns.
Estate planning
Regarding estate planning and inheritance tax, this is another service that should be utilised sooner rather than later. Any reputable wealth management company will provide an estate planning service to mitigate long-term inheritance tax liabilities. Those who follow financial allowances will know that the inheritance tax allowance, currently £325,000, has been frozen since 2009. Increasing this by inflation between 2009 and 2023 would see the allowance just over £480,000 today – a perfect example of fiscal drag.
Philanthropic planning
Wealth management companies are well-connected regarding charitable services and philanthropic planning. In many cases, this is a win-win situation with tax benefits for those donating and obvious benefits for those receiving. We live in an era where many investors have a more deeply ingrained social conscience, prompting a significant increase in philanthropic planning. The introduction of Environmental, Social and Governance (ESG) has also put pressure on companies to be more appreciative of their social responsibilities.
Legal services
In many ways, the legal services offered by wealth management companies bring together various investment-related services. This could involve creating a trust, writing a will, transferring assets and other investment/finance-related activities. Getting the legal technicalities right is vital because a simple mistake today could prove costly further down the line.
Retirement planning
Last but by no means least, one of the main services provided by any wealth management company is retirement planning. Typically this will involve a changing approach to investment, more growth-orientated in the early years, balanced in the mid years and more income/secure investments in retirement. This is an area of wealth management services which benefits from cash flow predictive software, which can help alert you to potential funding problems as you approach retirement.
Summary
As you can see, wealth management companies provide many different services covering all parts of your financial life. In the early days, there will be more focus on growth, while this will slowly switch towards income and more secure assets as you approach the end of your working life. Injecting a degree of structure into your finances (and tax planning) early can simplify what can sometimes be a difficult journey. It is also just as important to protect your wealth as it is to enhance it going forward. It’s not all about the profits!