The following article discusses the definition of both wealth management and financial planning and what the difference is between the two.

New Trends In Wealth Management

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by John Napolitano, CPA/PFS

The first trend in wealth management is an emerging understanding of the difference between financial planning and wealth management. Over the past few years, I have heard many botched attempts to explain what wealth management really is. Answers usually revolve around a client’s portfolio size or net-worth, and many professionals think wealth management is only for the ultra-wealthy. Not necessarily.

You should think of wealth management in the context of financial planning. A financial plan, or a financial planning engagement, can occur as a one-time engagement. You gather facts and qualitative goals from your client, as well as their objectives and life dreams. Then you assemble a report for your client that recommends strategies for maximizing their financial resources and accomplishing their objectives. Your client may be very satisfied with the work that you did, go on their merry way and never implement any of your recommendations - on their own or with other professionals.

Wealth management, on the other hand, is the manifestation of a financial planning engagement into a pro-active and holistic relationship for an indefinite length of time - or at least the foreseeable future.

Wealth management definitely includes life planning, and the wealth manager agrees to act as a client’s head coach and will oversee and advise the work done by other professionals. A wealth manager is accountable for ensuring a client has a current estate plan, but the wealth manager doesn’t necessarily draft documents. Wealth managers make sure their clients are properly insured, including ownership and beneficiary designations for life insurance. But, a wealth manager doesn’t necessarily sell insurance.

Retainer fees are the clearest trend among personal financial head coaches. Clients are willing to pay regular monthly or quarterly retainer fees to advisors who walk the walk and holistically advise. It’s true. Information overload is impacting your clients too. What they want is a sound and capable mind guiding them through most of their important financial decisions. Advisors who are not charging regular retainer fees and who are only getting paid from transactions or assets under management, may be missing planning opportunities that clients don’t even recognize.

Another trend is that of a comprehensive Customer Relationship Management (CRM) system that incorporates workflow and your service model. Most firms today still operate under the “squeaky wheel gets the grease” model. In other words, the clients who call most frequently and demand regular meetings with their advisors are the ones who actually get those meetings. The other clients, who do not make such demands, don’t get meetings or special attention.

If you have a service model that mandates that all “A” clients receive weekly market reports, monthly newsletters on financial planning, quarterly performance reports, quarterly phone calls and face-to-face meetings three times per year, you need to make that happen. This is no time for excuses and a good CRM will see to it that these events occur and that meetings are scheduled (by someone other than you!).

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.