Is It Worth Paying a Wealth Manager?

You’ve worked hard for what you’ve earned. Wealth management is about protecting what you’ve accumulated while also finding opportunities for growth. Accomplishing all of that on your own can be difficult, especially if you lack the skills, interest or time to keep track of it all.

At a certain point, it makes sense to hand the reins over to a wealth manager. However, the fees associated with wealth management can make some people stop to think before taking the next step. While it's wise to keep an eye on fees, remember you’re paying for experience, expertise and perspective that you might not otherwise have.

If you’re wondering if it’s worth paying a wealth manager, you should understand the various ways wealth managers are paid. The good news is that you have several options—and not all of them involve making a separate payment to the advisor. Below is a look at the different ways wealth managers get paid and the value they bring.

How do wealth managers get paid?

Here are three more common ways wealth managers earn their money. As you work with a financial professional over time, you may combine one or more of these.

• Fee-based planning: Instead of being charged hourly, you’ll pay various fees as required. That may include a set-up fee for new clients, an implementation fee, an annual retainer fee or other fees charged on a per-service basis. You can ask the wealth manager or wealth management firm for their fee schedule.
• A percentage of assets under management (AUM): When wealth management involves investments (as it typically does), some wealth managers will retain a percentage of your assets under management. This fee will often be paid annually or quarterly, depending on the agreement. Rather than paying out of pocket, the money is simply withdrawn from your investment portfolio at an agreed-upon date. This is the most common arrangement across the industry. The percentage will vary a lot from advisor to advisor. It can range from a fraction of a percent to 3 percent or more. Of course, it’s important to understand the fee structure before you agree to work with a wealth manager.
• Product commissions: Finally, some wealth managers don’t require any out-of-pocket payments from clients whatsoever. Instead, they are compensated by earning product commissions whenever they make a sale. This can include insurance policies, investment products or other financial products.

Everyone deserves a professional to look over their financial details and make recommendations for a better future. Look for a match between what the advisor offers and what feels comfortable to you. After all, you want to be motivated to act on the advisor’s advice. Otherwise, you both spent time while nothing really improved.

When you think about which arrangement you prefer, keep in mind how involved you want to be in financial management. Do you have a few hours per week or month to devote, or are you better off letting someone else handle all the details? Are you interested in keeping up with economic trends or leaving that to the experts? And, will you be able to stick with your plan—even when the market is down—without someone guiding you?

If you are particularly concerned about limiting your wealth management fees, working with a commission-only advisor can be an excellent option for you. While you might understandably be skeptical about taking advice from someone who profits when they make a sale, there are ways that you can ensure you’re getting good advice from your advisor. For example, you might look for an advisor with their Certified Financial Planner (CFP) certification, which carries its own code of ethics.

What are the differences in paying a wealth manager versus a financial advisor?

Both a financial advisor and a wealth management advisor can typically help you with holistic financial planning. They’ll learn about your goals and help you meet those goals over time. They’ll make sure you have the tools in place to help grow your wealth and protect it from an unexpected event. A wealth manager typically brings additional tools and specializations needed for higher net worth households like advanced tax-efficiency planning and estate planning, sophisticated investing strategies or a more in-depth analysis of your financial plan.

At Northwestern Mutual, we always recommend a multifaceted view of your money. It’s important to balance the potential growth of your investments—when things go well—with protection for what could go wrong.

Is it worth paying a wealth manager?

Keep in mind, other fees may apply outside of the three we’ve listed above. That’s why it’s important to have a complete understanding of a wealth manager’s fee structure beforehand. Still, at the end of the day, a wealth manager can provide value in a lot of different ways regardless of your goals, financial savviness, and how involved you wish to be in your financial planning. A wealth manager can be especially beneficial if:

• You have a limited understanding of finances or want to be relatively hands-off. If you’re not interested in being as involved in tasks related to managing your finances, a wealth manager or financial advisor can educate you on best moves for your situation and follow through on your plan for you.
• You need help keeping an eye on the big picture. If you want to be hands-on with your money, a wealth manager can still provide value by keeping your strategy matched with your goals. For example, if you’re an active trader but not a tax expert, a wealth manager can provide tips on potential tax savings. They can coach you through financial decisions with the awareness of new rules, laws or products that benefit you.

Finally, the best wealth managers will have a firm sense of the economic trends that may impact your portfolio. Your advisor can tweak your portfolio with a goal of capitalizing on trends. This understanding is especially important in volatile markets or amid periods of political, economic or social change.

Meeting with a Northwestern Mutual financial advisor can be the first step to decide if wealth management is for you. We will match you with an advisor who understands your life circumstances and how you think about money. We’ll meet you where you’re at and work with you on a tailored financial plan designed to help protect what you’ve already built and help you feel more confident about reaching your goals.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.