Wealth Management: Not Just For The 1%

by Blake Herzog

“Wealth management” by name alone implies that it’s a service for people with high net worth — a lot of dough to spend or invest. But it’s the middle class families and retirees on down who really need it, simply because they don’t have as much wealth to spare.

Luckily, this can be a DIY project, one of the most important you could ever take on.

There are so many important steps that can be taken on your own to put your present and future on solid financial footing.

For instance:

  • Keep an emergency fund in a savings account or short-term CDs, which can cover three to 12 months of expenses. This is critical for protecting yourself against unexpected job
  • losses or medical bills. Try to build that up even more if you’re working in a field where open jobs are few and far between.
  • Know how much you want to save for retirement; many experts suggest saving 10 times your annual income. The number depends a lot on what kind of lifestyle you want to have
  • once you are done working.
  • Look into every type of retirement savings account available to you, whether it’s a 401(k) plan at work, an IRA (either traditional or the Roth version) or whichever product works best for your future.
  • Don’t be afraid to invest some of your savings in the stock market where it’s likely to multiply much faster and farther than most savings accounts. But do keep an eye on current economic conditions and how they’re affecting the mood of the market.
  • Carry all the insurance you’re going to need, including life, health, home and vehicle.
  • Do some basic estate planning — draft a will, power of attorney, advanced medical directive, living will and other essential documents.

You may need an attorney to help ensure your estate documents take effect, and there are certainly other situations where bringing in either a wealth manager or financial adviser would be a wise move:

  • If you’re experiencing or planning a major family life change such as parenthood or divorce. Even couples seriously dating may want to drop into an office to get a sense of where they stand on financial issues, which have doomed many a relationship.
  • You’re seeing a rapid increase in your wealth through a job change, promotion or other means. An adviser or manager can make sure the influx of cash isn’t being overspent and is being invested wisely and managed for tax purposes.
  • If retirement is on the horizon, or already here, a specialized planner can help you figure out what your goals for that phase of your life are and what steps you need to take to achieve them. Some of the planners you consider may boast a retirement-specific credential after their name, but make sure it’s one with teeth; it isn’t that easy to get.
  • If you have too many investments to be able to monitor each one closely, or if you have little interest or aptitude for spending or tracking money, bringing in an adviser can be an especially good idea.

Wealth managers and financial planners take different approaches to the responsibility of managing your finances, though both generally set a minimum net worth for their clients.
Besides generally working with higher net-worth clients, most wealth managers provide holistic services addressing all areas of their clients’ financial lives from tax work to legal and estate planning. Many financial planners, on the other hand, have a specialty such as investing, accounting, life insurance/estate planning or others often based on the kind of certification they have.

Two of the most common and rigorous certification programs are Certified Financial Planner (CFP) and Chartered Financial Consultant (ChFC). Both ensure their holders have a well-rounded knowledge of financial planning and can work effectively in most aspects of your financial life.

Certified Public Accountants (CPAs) are keen at organizing investments and reducing tax burdens, while Chartered Mutual Fund Counselors (CMFC) help investors navigate the complexities of such large funds. A Certified Alternative Investment Analyst (CAIA) focuses on alternative types of investments, including real assets, hedge funds and commodities.

Most charges are assessed as a percentage of the total amount of wealth being managed, while some advice is available on a flat-fee basis. “Fee-only” advisers earn their income solely from fees paid by their customers and not from commissions for selling certain financial products. This model can eliminate most conflict-of-interest issues but tends to be more expensive than some customers can afford.

The greater Prescott area is home to wealth managers and financial planners who can fit into at least one of these or multiple molds. Working with a planner who lives and works in your community means you’re more likely to be talking to someone familiar with the costs of living there and how to maximize your potential to live your best life.