What Is Wealth Management? And Do You Need It? (2024)

If you’ve been working hard and investing for years, don’t be surprised if you look up one day and find that you’ve built a nest egg worth millions of dollars.

After all, there are more than 12.5millionmillionaire households in the U.S. today. Beyond that, there are about 1.8 million households with an “ultra-high net worth” between $5 million and $25 million.¹(Fun fact: In Dave Ramsey’s bestselling book,Baby Steps Millionaires, we found that most millionaires who used the7 Baby Stepsreach the millionaire mark in 20 years or less!)

While you don’t need millions of dollars toget investing advice, youwillface some unique challenges and opportunities as your wealth grows. There are higher income taxes and complex estate planning and figuring out umbrella insurance . . . the list goes on and on!

Getting all of that right requires a more tailored approach—and a ton of financial expertise! That’s where wealth management comes in.

What Is Wealth Management?

Wealth management is a type of financial advising designed to help high-net-worth clients continue togrow their wealth, protect their stuff, and leave a legacy behind for their families.

Here’s the bottom line: As your wealth grows over time, your financial situation becomes more complex, and there are certain forces around you that will threaten to chip away at your wealth. We're talking about things like estate taxes, fees and inflation. Wealth management can help you navigate through those issues and avoid some serious financial pitfalls.

How Much Money Do You Need for Wealth Management?

Like a roller coaster you can’t ride unless you’re a certain height, you need a certain amount of money invested before you qualify for wealth management services. So, how much money are we talking about?

Some places might offer a more basic form of wealth management if you have around $250,000 or $500,000, but for the most part, you’ll need to have millions of dollars invested in order to work with a wealth manager.

Brokerage firms usually require account minimums of at least $2 million, $5 million or $10 million to qualify for their wealth management services. That may sound like a high price of admission, but thousands of people have used the 7 Baby Steps to get out of debt and become Baby Steps Millionaires! It is possible.

Maybe you’ve reached millionaire status and can meet those required account minimums no problem. If that’s you, congrats! You’ve crushed it, as the young ’uns say. But whether you’re a multimillionaire or you’ve just started on your investing journey, ourSmartVestor Prosare investment professionals who will help you form a game plan for tackling your investing and wealth management goals.

What Strategies Are Used in Wealth Management?

How exactly does wealth management work? And how will it help you get to where you want to go? We’re glad you asked! Here are some of the most common strategies a wealth manager uses to advise their clients:

1. Set financial goals.

Goals are dreams with work boots on—they get you closer to where you want to go! Maybe you want to travel the world in retirement, start a nonprofit organization, or continue to look for ways to grow your wealth (or maybe all of the above!). A good wealth manager can help you set clear goals that will bring you closer to making your dream retirement a reality.

2. Maximize your investment options.

Like most investment professionals, a wealth manager can help you pick and choosegrowth stock mutual fundsthat have a long track record of success and will help your money grow. They can also help you explore other ways to grow your money, like real estate investing.

3. Improve your tax situation.

Here’s the deal: As your net worth continues to grow and your investment portfolio becomes more diversified, filing your taxes won’t be as simple as it used to be. Not to mention that you’ll likely find yourself sending larger chunks of your hard-earned money to the IRS each year . . . more money, unfortunately, means more problems.

We’re all for giving Uncle Sam what’s owed, but not a penny more. Wealth managers can help you find smarter ways to approach investing that will help you keep more of what you earn instead of watching it go up in smoke because of the tax man.

4. Get the right insurance in place.

Insurance is boring. We get it. But the wealthier you get, the more important it is to have the right insurance in place. One bad car accident, for example, could lead tomillionsof dollars in damages and injuries that could leave you digging into your retirement funds or going back into debt to cover the costs. That’s where umbrella insurance comes in.

If your net worth is above $500,000, youneedumbrella insurance, which is an extra form of liability insurance that protects you from large claims or lawsuits. Trust us on this one. Umbrella insurance can shield you from a hailstorm of hefty legal bills youdon’twant to deal with!

5. Create or update an estate plan.

Way too many families are ripped apart when someone in the family dies without leaving clear instructions for how to divvy up what was left behind. That’s not just stupid—it’s irresponsible! For your family’s sake, don’t let that be you.

Goodestate planningmeans having a plan in place for all your stuff once you pass away. Everyone knows who gets what! To be clear is to be kind, and a good wealth manager can help walk you through the steps of creating a good estate plan.

Also keep in mind that larger estates might be subject to federal estate taxes andinheritance taxesin certain states, and a lack of estate planning could lead to some tax filing headaches for your loved ones when you’re gone. A wealth manager or an estate planning attorney can show you how to avoid or minimize those taxes so your legacy isn’t lost to taxes and red tape!

What Does a Wealth Manager Do?

If you’ve ever gotten fitted for a suit or a dress, you know it’s quite the experience. A tailor invades your personal space to take measurements of your arms, your legs and your chest, and then they’ll use those measurements to craft an outfit that fitsjustright.

A wealth manager does the same thing—well, for your finances, not your pants! They’ll get to know you and your financial situation, and then they’ll help craft strategies and a game plan that makes sense foryou. They can provide counsel on all kinds of financial topics or situations folks who have millions of dollars in assets deal with.

Here are the services that usually fall under the umbrella of wealth management:

• Financial planning
• Investment management
• Charitable giving
• Legal planning
• Estate planning
• Accounting and tax services
• Retirement planning

Now listen up: When you hire a wealth manager, that doesn’t mean you’re simply giving that person permission to do what they want with your money or tell you what to do. That’s how you get ripped off!

Whether you have $10,000 or $10 million in investments, it’syourresponsibility to manage it well and no one else’s. A good wealth manager is there to act as anadvisorto you—to teach you, answer your questions, and provide you with information that will help you make wise decisions about your money.

But make no mistake—you’re the one in charge, and you get the final say. They work for you, not the other way around. And if they ever talk down to you or forget what their role is in this arrangement, it’s time to find a new wealth manager.

How Do I Choose a Wealth Manager?

Picking the right wealth manager is a huge decision. This is going to be the person you lean on for counsel and advice in managing millions of your hard-earned dollars. So how do you pick the right wealth manager for you? Here are some tips to help you on your search.

1. Talk to several different wealth managers.

Whatever you do, don’t just pick the first wealth manager you talk to! Set up a consultation meeting with several wealth managers before you make your final decision. When you give yourself more options to choose from, you’re more likely to make the right call (and feel confident in the choice you made).

2. Make sure they have your best interests in mind.

You want to find a wealth manager whose goal is to serve you and help you reach your financial goals—not someone who is just trying to sell you some junky financial product or wants you to invest in something sketchy. You have to be able to completely trust your wealth manager to guide you in the right direction and help you make wise decisions with your wealth.

If you start to feel that same slimy feeling you get when you talk to a sleazy car salesman, run out the door and don’t look back!

3. Choose a wealth manager with the right experience and expertise.

Make sure you’re working with a wealth manager who has a solid track record—someone who knows how to navigate all the complexities of managing large amounts of wealth and has done so for many years with many clients. Basically, you want someone who knows what the flip they’re doing!

This is a good time to ask about their investing philosophies, how long they’ve been in wealth management, what their qualifications are, how they communicate with their clients, and anything else you can think to ask.

4. Find a wealth manager who is willing to teach you.

Things can get really complicated, really fast when you start talking about taxes, investing and insurance. Your wealth manager should be ready and willing to answer any questions you have about complex financial topics and break them down in a way that helps you fully understand them.

After all, you should never make a big financial decision unless you know exactly what you’re doing and why you’re doing it. And your wealth manager should be the person who walks you through that process.

Remember, your wealth manager works for you—not the other way around. The moment they talk down to you or tell you to do something because “they said so,” it’s time to find a new wealth manager.

How Do Wealth Managers Get Paid?

Wealth managers normally earn their income by charging a percentage of the assets they manage—generally around 1% annually, but it depends on the firm. If you have $5 million worth of investments with a wealth manager who charges a 1% fee, you’d pay them $50,000 in commissions to advise you each year.

That might soundlike a lot, but having a good wealth manager in your corner to help you handle the complicated stuff will probably save you more than they’re costing you!

Is Wealth Management Right for You? Talk to a Pro.

Still not sure if you need wealth management services? The truth is, most people don’t need that level of service with their investments—not until they have a multimillion-dollar net worth. But you don’t need to be ultra-wealthy to get personalized investing advice.

One of our SmartVestor Pros can help you answer any questions you might have. They're investment professionals who can help you figure out whether wealth management services are the right option for you as you work toward your financial goals.

Find your SmartVestor Pro today!

Want to learn more? Dave's bestselling book,Baby Steps Millionaires, will show you the proven path that millions of Americans have taken to become millionaires—and how you can become one too! Order your copy today to learn how to bust through the barriers preventing you from becoming a millionaire.

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.