What is Wealth Management & Does This Service Suit You?

You may have come across the term “wealth manager”, and have wondered how they differ from your usual financial advisor. In this article, we’ll take a deep dive into what a wealth manager is, what they do, and whether their services are suitable for your needs.

Understanding wealth management in Singapore: What it is and the role of a wealth manager

What is wealth management? It is a specialised financial service aimed at affluent individuals and families. It goes beyond simple investment management, encompassing a holistic strategy focused on building, preserving, and transferring wealth.

The role of a wealth manager is to create a tailored financial roadmap that aligns with the client's unique goals, ensuring their wealth not only grows but is also safeguarded and distributed according to their wishes.

This often requires the wealth manager to coordinate various financial disciplines, including investment advice, tax planning, estate planning, and risk management.

Wealth managers in Singapore typically provide a range of comprehensive wealth management services, including:

• Investment management

• Financial planning

• Tax planning

• Estate planning

• Retirement planning

• Risk management

• Insurance planning

Wealth managers often cater to the needs of HNWIs and may possess specialised expertise in addressing complex financial issues relevant to the ultra-wealthy. For example, they may advise on strategies to optimise estate planning, considering local regulations and tax implications.

Many private wealth managers work in collaboration with other financial professionals, such as accountants, tax advisors, and estate planning specialists, to offer holistic financial advice.

For instance, a wealthy individual who has experienced divorce, owns multiple properties (perhaps including landed property or commercial real estate), and holds various investments and accounts may require expertise in legal matters, property taxes (including Additional Buyer’s Stamp Duty), and investment diversification. 

A wealth manager could develop a complex financial plan that addresses each of these needs, either independently or by coordinating with external experts.

How wealth managers are compensated: Fees and models

Understanding how wealth managers are compensated is crucial when choosing the right professional to manage your finances. The way wealth managers are paid and the factors that influence the amount can vary. 

Compensation may depend on the type of firm where the wealth manager works. In a large financial institution, wealth managers might receive a salary and bonuses. Alternatively, they might earn a commission from any financial products that they’ve helped you to buy or invest in.

However, if you are working with a private firm owned by an advisor, the compensation structure can be different. In these cases, advisory fees, typically ranging from 0.25% to 1% of assets under management (AUM), would generally go to the advisor. 

It's generally advisable to work with a fee-only fiduciary; this means they are paid directly by you for their services. It also means they are legally obligated to act in your best interests, and are not incentivised to recommend specific financial products for commission. 

Factors such as the complexity of your financial needs, the scope of wealth management services required, and the advisor's experience can also influence the overall cost of wealth management.

What’s the minimum investment for wealth management in Singapore? 

When considering wealth management services, it's important to be aware that these services often require substantial minimum asset levels.

While the exact minimums vary between providers, it's common for wealth management firms catering to HWNIs to have steep account minimums. For example, while US-based examples like Fidelity's "private wealth management services" require significant investments, locally-based providers also tend to have thresholds.

It is important to check with individual providers to get the most up-to-date information on their minimum investment requirements. These minimums reflect the personalised and comprehensive nature of the wealth management services offered. 

Some online brokerages in Singapore, however, may offer lower-tiered wealth management or advisory services with lower entry points, though these might not include the full suite of services provided by dedicated wealth management firms.

>> View our list of the best wealth management services in Singapore

Wealth management strategies: Key considerations 

When selecting a wealth manager, it's important to consider the investment strategies they employ. 

There are many different investment strategies financial advisors use to help increase their clients’ wealth, from value investing (popularised by investors like Warren Buffett) to growth investing. Wealth managers, particularly those dealing with larger accounts, tend to have slightly different approaches. They may offer their clients access to a wider range of wealth management investment options, including alternative investments like hedge funds and private equity offerings.

Wealth management strategies also tend to be more holistic, incorporating all aspects of a wealthy individual’s life. This includes considerations like estate and tax planning, which may involve navigating Singapore's specific tax laws and regulations, as well as family office and business succession planning.

The investment strategies a wealth manager employs will also likely align with the individual investor’s risk tolerance and financial goals. For example, if a client is nearing retirement, a wealth manager might shift the focus from riskier growth investments to safer investments that can help maintain their wealth and provide a steady income stream. This is especially relevant in Singapore, where retirement planning, Central Provident Fund (CPF) integration, and property investment often play significant roles in financial planning.

Choosing a wealth manager: Credentials and qualifications 

When selecting a wealth manager, it's crucial to consider their certifications and credentials. In Singapore, financial advisors and wealth managers often hold certifications and credentials recognised by local institutions like the Institute of Banking & Finance Singapore (IBF). These qualifications demonstrate a level of expertise and adherence to industry standards.

While many wealth managers will be registered investment advisors, consider seeking out a certified financial planner (CFP). CFPs possess a rigorous certification for financial planning and are held to a fiduciary standard. This certification is globally recognised and demonstrates a high level of expertise in financial planning.

In addition to a CFP, you may also want to work with a Certified Public Accountant (CPA), especially for complex tax matters. Some wealth advisory firms may have both CFPs and CPAs on staff, allowing for a more integrated approach to managing your overall financial picture, including tax optimisation and planning.

Wealth manager vs. financial advisor: Understanding the difference

It's important to understand the distinction between a wealth manager and a financial advisor, as these terms are often used interchangeably but have key differences.

A financial advisor provides general financial guidance to a broad clientele, focusing on foundational financial planning and investment advice. In contrast, a wealth manager specialises in delivering comprehensive and sophisticated financial solutions tailored exclusively to the complex needs of high-net-worth and ultra-high-net-worth individuals.

Here's a brief comparison:

• Scope of services: Wealth managers generally offer a wider range of services than financial advisors. While a financial advisor might focus primarily on investments and basic financial planning, wealth management services often extend to areas such as estate planning, trust services, family legacy planning, charitable giving planning, and even legal planning. In Singapore, this might also include considerations for family offices and business succession planning.

• Target clientele: Wealth managers typically work with HWNIs or ultra-high-net-worth individuals (UHWNIs) and families, and thus usually have significantly higher investment minimums than a regular financial advisor. Financial advisors might cater to a broader range of clients with varying levels of wealth.

• Specialisation: Wealth managers often possess specialised expertise in dealing with the unique financial challenges faced by the affluent, such as complex tax optimisation strategies, philanthropic planning, and managing large and diverse portfolios. On the other hand, financial advisors focus on basic financial planning such as budgeting, debt management, and retirement, emphasising education and building a solid financial base.

It's crucial to remember that the job title "wealth manager", like "financial advisor", is a generic term that can be used by anyone and does not, in itself, indicate any specific credential or qualification. Therefore, it's always essential to thoroughly vet any type of advisory service you consider, whether they call themselves a financial advisor or a wealth manager, to ensure they have the necessary expertise, qualifications, and ethical standards to manage your financial affairs in Singapore.

Should you choose a wealth manager or financial advisor?

Deciding between a wealth manager and a financial planner hinges on the complexity and scope of your financial needs. Wealth managers are best suited for individuals with substantial assets and intricate financial situations. 

If you require comprehensive, integrated services encompassing complex tax optimisation, estate planning, business succession planning (especially vital for local business owners), or philanthropic strategies like donor-advised funds, a wealth manager's expertise is invaluable. They provide a holistic approach, coordinating various financial aspects to protect and grow significant wealth.

On the other hand, financial planners are ideal for those with more specific or less complex financial needs. Their "a la carte" service model allows you to address targeted areas, such as retirement income planning, budgeting, or basic investment strategies, without committing to a full suite of wealth management services. 

If your primary goal is to establish a solid financial foundation, manage debt, or create a simple retirement plan, a financial planner offers flexibility and affordability. Conversely, if your financial picture demands specialised, coordinated expertise across multiple disciplines, choose a wealth manager.

Other options to wealth management

If the high minimum asset requirements of some wealth management companies are more than you're prepared to invest, you may not necessarily need the full suite of services offered by those firms. While some financial planners also cater to HNWI clients, there's a growing number who work with affluent and middle-income individuals. Many of these advisors operate online, offering convenient access to investment management and financial planning services.

These online financial advisors often provide portfolio management (also called investment management) and in-depth financial planning, including access to a human financial planner, often delivered remotely via phone or video conference. While you might not have in-person meetings, you'll still work directly with a financial advisor who can help you build a holistic financial plan or achieve specific financial goals.

The services offered can vary significantly between providers. You might get access to a dedicated Certified Financial Planner (CFP) or not. Some providers will assist with specific financial questions but not others. For example, complex questions around the taxation of self-employment income or Singapore's specific property tax regulations might be beyond the scope of some companies.

Given this variety, it's crucial to shop around and compare alternative wealth management services to find the provider that best meets your individual needs and financial circumstances.

>> Take a look at our list of the best wealth management accounts

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