how to become a wealth manager

how to become a wealth manager

How to Launch a Wealth Management Firm

The independent wealth management industry has been a consistently growing segment of financial services over the past several years. According to Boston Consulting Group, there is about $55.7 trillion in private wealth up for grabs in the United States and Canada. This figure has many financial professionals contemplating the idea of opening their own wealth management firm. In this article, we’ll take a look at some key tips independent financial advisors should keep in mind when opening their own wealth management firm.

Aspiring wealth management entrepreneurs have to ensure they’re following the rules and etiquette when leaving their current employer. In many cases, financial services employees have contractual obligations to their employers that prevent them from working on or for a competing firm and advertising outside services to clients. Some employees may also have non-compete clauses in their contracts that forbid them from working in the financial services industry for a period of time following their departure, although these contracts can often be broken under some circumstances. (For more, see: Don't Sign That Non-Compete Without Reading This.)

Entrepreneurs should carefully consider these contractual obligations to avoid being sued and adhere to common-sense etiquette. For instance, entrepreneurs should not work on their new business during business hours, shouldn’t contact clients until they have left their employer and should approach former clients tactfully after-the-fact to avoid any problems with their former employers.

Independent financial advisors that seek to build up their own practice are inevitably taking a lot of risk in the form of upfront costs. Unlike most small businesses, advisory firms must meet a number of complex regulatory requirements that can prove quite expensive. The first major expense incurred by a new business is compliance, including the setup of an ADV (client brochure) and a state licensure. In general, these services can cost anywhere from $2,000 to $5,000 with a recurring component each year of $2,000 or more. Insurance costs, office expenses, letterheads, websites, banking costs, association costs, subscriptions and numerous other costs can easily add up to over tens of thousands of dollars. (For more, see: Start Your Own Financial Planning Firm.)

Financial advisors must also consider the opportunity cost of establishing their own independent practice, since a percentage of their existing clients are unlikely to follow them. In addition, many referrals may refuse to move over to a new practice and instead prefer to remain with a larger company. These costs can also amount to tens of thousands of dollars, but are offset by greater profitability on a per-client basis.

Most entrepreneurs have to hit the ground running as soon as they leave their former employers to make payroll and sustain their new enterprise. Often, the first step is reaching out to former clients while keeping the rules in mind. Before reaching this point, entrepreneurs should have a well-rehearsed pitch for these former clients that effectively communicates why they should move their accounts. Newly established businesses have no reputation (other than the owner’s) and a high level of risk in terms of solvency early on, which are challenges entrepreneurs must overcome when dealing with these former clients and trying to attract new clients. (For more, see: Management Tips from Top Financial Advisors.)

The best pitches highlight the entrepreneur’s skill sets and competitive edge compared to larger institutions. For example, the new firm may specialize in using computer algorithms to identify the best opportunities. A new owner may also point out that smaller wealth management firms are able to provide more personalized client support given the smaller client base, ensuring more attention is paid to their account and maximizing their returns.

Setting up a new wealth management firm can be a complex and time-consuming process that involves extensive legal, regulatory and compliance work. While financial advisors may be familiar with many of these things, establishing them often requires professional assistance. The good news is a growing number of companies have been established to help financial advisors set up their own practice. In exchange, these companies may charge a consulting fee, percentage of assets or even take an equity stake in the new firm. Tru Independence, for example, handles everything from registered investor advisor (RIA)/broker-dealer registration and credit and lending facilities to office space selection and design for aspiring entrepreneurs.

In addition to a solid legal footing, independent financial advisors should consider investing in professional help when it comes to designing a professional-looking website, business cards and other marketing materials. Professional consultants can also prove useful in avoiding the hiring of full-time employees to handle simple tasks like bookkeeping, accounting or even secretarial duties, which can help keep costs low early on without sacrificing quality. (For more, see: Keys to Going Independent for RIAs.)

Venture capitalist Marc Andreessen once said “software is eating the world,” which means technology is rapidly changing the way entire industries operate. While financial services have been slow to adopt new technology, it’s becoming an increasingly important part of the ecosystem. There are many different tools that independent advisors can use to improve their client services and optimize their profitability. (For more, see: How Technology Helps Financial Advisors.)

Technology can also be used to reduce costs in other areas of the business, such as payroll, accounting or marketing. For example, do-it-yourself services like ZenPayroll can help keep payroll costs down relative to hiring an internal accountant, while automated phone systems by companies like Grasshopper can avoid the need for a dedicated secretary. These types of services may not be advisor-specific, but can certainly help improve profitability.

Opening a wealth management firm is a complex process, but with the right help and tools in hand, it can be very rewarding for entrepreneurs. By keeping these basic rules in mind, financial advisors can increase the odds of success and avoid costly lawsuits and other difficulties associated with moving away from the corporate world and into their own practice. (For more, see: Why It's a Great Time to Launch an Advisory Firm.)

How To Become a Wealth Management Advisor

Life is complex. And when it comes to personal wealth management, you have to make the right choices and the right decisions. One wrong move and your business is at stake. Your investments today will reap its fruits in the future. There are certain factors that may affect the decisions that you are making when it comes to your finances. Money management is no easy thing. It needs a lot of thought and analysis and this is where financial advisors, partners, financial consultants, etc. come in handy.

Wealth management deals with family owned companies, inheritances, real estate investments, entrepreneurial transitions and partnerships. It involves financial services, planning and implementation. This kind of service is usually provided by financial institutions, corporate entities, consulting firms, and financial advisors that specialize on fund management.

Wealth management includes:

  • Debt management. Getting out of debt is one of the major goals of wealth management. When you have too many loans, it creates a lot of headache and financial burden. As the popular saying goes, “Don’t bite off more than you can chew.” Think about your credit standing and your bills before you splurge into something.
  • Budgeting your hard-earned money. This is something that you may have learned when you were still a kid. Wise allotment of finances is essential especially when you have quite a few to manage. The right approach to handling money is a good start to becoming the next millionaire.

If you are planning to become a wealth management advisor in the future, you need to start off with a bachelor’s degree. Any degree will do but a coursework in accounting, finance and economics is an advantage. You must be analytical and a critical thinker by nature and good in numbers, strategic planning, etc. If you have an MBA, you will be a cut above the rest during the hiring process, but eventually you will be compensated according to your performance and not on your academic credentials. In order to be a licensed financial advisor, you need to be certified in this field and take continuing education courses. There is online training software that you can find on the web. The Financial Industry Regulatory Authority (FINRA) is offering a Series 7 exam for licensure purposes. The exam would also require a sponsor from a member firm before you can are allowed to take one.

As a wealth management advisor, you are expected to perform certain tasks:

  • Inform your clients on the status of financial markets regularly.
  • Monitor your client’s accounts to help your clients maximize the after tax values of their wealth.
  • Help in planning and strategizing in different investment opportunities.
  • Update investments and keep up-to-date with the latest investment trends.

Being a wealth management advisor is not an easy career. Any financial matters whether it is private banking, cash management or any other services will be handled by you.

Business Management Skills : How to Become a Manager

To become a manager, it is important to first make absolutely sure that it is right for you. Find out if you have the passion and desire to become a manager with advice from a career expert in this free video on business management skills.

Bio: Debbie Benami-Rahm is the president of DBR Career Services, Inc., and provides her career expertise to individuals in transition to get unstuck and find career fulfillment.

How to become a wealth manager

You’re already well into your career and you haven’t hit it big with any job opportunities yet. You’re not the CEO of a company, you haven’t invented anything that will make you millions, and none of these things seem to be feasibly in your future.

Luckily, fancy job titles are not necessarily what makes people rich—though they certainly do work for some people (think Bill Gates). We can’t all be Bill Gates or Donald Trump, but does your lack of a company of your own mean a lack of wealth? Certainly not! It is possible to build wealth without a huge income, it just takes a little more planning and organization.

The key to building wealth is to keep track of your net worth. Your net worth is different from your income because it includes your assets and debts as well. In order to build wealth you should be increasing your assets—an investment in a home or a car would be an example of this—while simultaneously decreasing your debts.

So how can you do this and get yourself on the right track for building wealth?

Plan how you’ll spend your discretionary income

Discretionary income is a great, but difficult, thing. When you have a job and start making a lot of money, it’s easy to start spending that money on the things that you want but that you don’t really need. Trust me, I know. What’s the first thing that you want to do when you get a pay raise at work? Start planning your European vacation of course! But if you want to start building wealth you need to do more proactive planning with your discretionary income.

Spending money on things like vacations or brand name clothes won’t increase your wealth, unfortunately. So, if you’re looking to build actual wealth you’ll need to start spending your discretionary income on either paying down debts or investing in assets—ideally both!

Before your paycheck even comes you need to budget yourself. In fact, stop thinking of this income as “discretionary” and start thinking of it in terms of building your wealth. If necessary, allot yourself a budget for some things that you want, but don’t need, but put away most of that money for building your wealth.

This process is going to take some time, but down the line you’ll be more thankful that you’ve built so much wealth than if you had bought new clothes every month. Clothes are not wealth. Money is wealth. Don’t forget it.

Start building your wealth as soon as possible

The quicker you can start saving the better, because of compounding interest. One benefit of compounding interest is that you’ll need to invest less money per month to achieve your savings target. Compounding interest simply means that the money you earn as interest also earns interest. If you start putting away only $200 per month today and can put that much money away every month for 50 years with 7% returns, you’ll have almost $1 million dollars by the end of the 50 years!

Just think, all you’ll have to do is stop spending so much money on beer and shoes, and you can definitely spring that $200 a month. See how much it pays off to be cautious with your discretionary income?

Whether you are building wealth on a low income or you‘re already a millionaire looking to protect your wealth, you need to get a financial advisor. Your job is to make money, but it’s not necessarily your job to know what you should best do with that money. Make sure you’re comfortable with your financial advisor, and don’t feel bad about changing if necessary!

A good financial advisor should be able to help you with savings goals as well as investments. Make sure that they are certified by the Certified Financial Planner Board of Standards, which will ensure that your advisor is up-to-date and practicing ethical money handling.

Saving money can be tricky, but it’s worth sacrificing your unnecessary expenses. Down the line, the payoff to saving early by putting away your discretionary income is huge. Get help with your finances and you’ll be setting yourself up for success by the time you retire!

Becoming a Wealth Management Client

Wealth managers follow a number of steps at the start of a relationship to ensure things are prepared for both sides and no rules are being broken.

With new technologies many wealth managers can carry out the business of opening an account very rapidly today, yet becoming a client is about more than form and checklists. The onboarding process is really about the wealth manager getting to know you and having a detailed discussion in a face-to-face meeting is a hugely valuable part of the process.

There is a big regulatory aspect to the process of becoming a wealth management client and there are a range of checks and assessments which need to be carried out and documented at the start of a relationship.

Regulators require wealth managers to carry out a range of checks so that they can document that their clients’ money is legitimate and ensure that their assets will be appropriately taxed. As you would expect, you will therefore have to provide various pieces of documentation to establish your identity:

  • Your address
  • Your nationality and domicile for tax purposes
  • You will also have to prove that the source of your wealth is above board, but this is usually pretty simple once the wealth manager has documented what you do for a living;
  • any directorships or significant shareholdings you may have; and how your own business is held if you have one.

In addition to the information requested from you, wealth managers will run their own checks (usually via third-party systems) to verify your identity, that you are neither “a politically-exposed person” (PEP) nor that you deemed to carry reputational risk. Simple internet searches will also form a part of these checks so your online presence will be noted by the wealth manager.

The rules around the prevention of financial crimes like money laundering and bribery are very strict. Although it might feel that you are being asked a lot of questions, you can rest assured that every client has to go through the same process. You would only want to deal with a wealth manager which takes its regulatory responsibilities seriously in any case.

Tax authorities are ever-hungry for revenues, and this has only increased since the financial crisis. HMRC, like tax authorities around the world, is taking a tougher stance on tax evasion. Therefore there is also a fair amount of documentation which may apply, depending on whether you are a resident domiciled UK client or whether you are domiciled elsewhere for tax purposes, and if you will be dealing with an offshore entity for whole or part of your wealth management relationship. For example, under legislation which came into force on 1 July 2014, wealth managers everywhere in the world are obliged to report on the assets of any clients who are US citizens or Green Card holders to the IRS. The added complexity caused by the new tax reporting requirements has led some wealth managers to stop working with US clients, but for others it has become a special area of expertise and we have several of these firms on the panel.

As with the Anti-Money Laundering (AML) and “Know Your Client” (KYC) parts of the onboarding process, remember that your wealth manager is only asking as many questions about your tax affairs as they have to under the rules. It is also the case that these conversations often uncover a need or gap in your wealth management strategy right away, so they can actually be very useful.

Suitability simply refers to the process of making sure that the financial advice the wealth manager gives is appropriate for your needs. The investment strategies and products the firm recommends must suit your investment time horizon, but more importantly they must represent a risk/return payoff which is suitable for you in both practical and psychological terms. Some clients aren’t fazed by volatility and want to chase growth fairly aggressively, whereas some are more comfortable with less risk and more modest investment growth, for example.

Accurately risk-profiling clients and then matching them to suitable investments for their needs is carried out in a variety of ways today. Some wealth managers take a very high-tech approach, whereby clients take a sophisticated psychometric risk-profiling test. Other wealth managers prefer a more qualitative approach, which is based predominantly on detailed discussions, or a combination of the two.

Contracts and investment proposals

The risk-profile and suitability assessments carried out by the wealth manager will be the foundation for the overall investment strategy they devise. Once your objectives and situation has been fully discussed (alongside any questionnaire-type tests you may have taken), an investment proposal will be generated. This will effectively “play back” your investment profile and what you are asking your wealth manager to achieve. Your contracts and letters of engagement will also include details of all the relevant fee schedules. The institution must make clear what you will be paying and why. If you are in any way unsure, just ask.

Once everything has been approved and documented on both sides your account will be opened and can then be funded. Once the money hits your account, the wealth manager will start to invest according to the parameters that have been agreed in the case of a “discretionary” investment relationship, or they will contact you with investment ideas in the case of an “advisory” investment relationship. You will now be looked after by your dedicated adviser, who will stay with you as your primary point of contact in most cases. They will probably be in contact quite often in the early days to make sure you are happy with how things are progressing.

The process of becoming a wealth management client covers a wide range of elements. While some are about rules and regulations, signing up with an institution really centres on your adviser understanding you as an individual and forming an accurate picture of your circumstances and goals. Most clients therefore find the on-boarding process very useful in terms of getting clarity around what they would like to achieve for themselves and their family (indeed, a lot of firms also offer some kind of educational events and programmes for clients who would like to better their understanding of financial planning and investing).

Your needs and requirements will be reviewed regularly as your relationship with your wealth manager progresses. The process of becoming a client is really just the start of what should be a very productive dialogue over time.

Our service provides a two-step process that matches your investment and personal aspirations to the right professionals saving you time, money and confusion. You can start the process by completing our smart online tool HERE .

Posted: 28 Oct 2014

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