Learn More About How We Work With Our Clients As Their Wealth ManagerMarcus Warburton answers some frequently asked questions about wealth management, listen in below.
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What is wealth management and why is it important?
We like to think that wealth management is independent financial advice delivered together with investment management. The investment management side means we can change investments along the way. The financial advice side makes sure we’re following the correct plan. Investment management and financial advice are often delivered separately – but it makes a lot of sense to combine them.
Who can benefit from wealth management?
Anyone who has money to invest, and people who already have money that’s invested. What usually happens is there’s a trigger point in people’s lives which means they need our services. Typically that will be when they inherit money from mum and dad – or they get divorced. It may also be someone who is doing well in their career, has built up a pot of cash and realises that leaving it in the bank is not the best thing to do.
Sometimes we help people who realise that the investments they’ve made themselves haven’t done all that well and that they need some advice. So it’s anybody in that kind of situation – it’s not about the person, it’s their financial position.
What is included in wealth management?
It’s everything that’s required to produce a cohesive financial plan. It’s not just the things that people usually think – such as setting up an ISA or investing a pot of cash. It’s about having the correct level of life insurance that goes along with it. Having the right pension arrangements in place, and managing inheritance to avoid prohibitive amounts of tax.
It’s about putting a plan in place that deals with all of your specific issues. It’s like a menu of services. It can involve any of the above – or none of them.
What is the difference between a wealth manager and a financial adviser?
This comes down to the proactiveness of the relationship. We do act as an independent financial advisor to lots of our clients. We have a great relationship with all of them, but where we act as financial advisor, it’s the client’s situation that drives the relationship.
Where we act as a wealth manager, we are the ones who drive that relationship. We will look at your affairs and make changes to your investments and plans to maximise your money.
As a financial advisor, we have to wait for the client to contact us. Most recently, the financial crisis and pandemic were obviously causing issues where people needed to look at their finances, and we encouraged them to come and talk to us. But where we act as wealth managers we were already making changes on clients’ behalf in real time.
What costs are involved with wealth management?
People hear wealth management and think it’s expensive and that it’s only for wealthy people. But our costs for financial advice are identical to the costs we charge for wealth management – there’s no difference.
In general terms, we charge 1% of the value of whatever sum we look after. But some things don’t work that way. With life insurance, for example, commissions are fixed by the life insurance provider and mortgages are the same.
When it comes to investment management, though, it’s all about the value of the funds we look after. We do have very wealthy clients and we have clients who are not as wealthy. Realistically, the minimum amount of money that we deal with would be £3,000 for a pension. Our largest client has £26 million. We charge the same fee rate to everybody and deliver the same service.
When it comes to costs, a client should ask what they are paying, not what the financial advisor or wealth manager is charging. There are costs within whatever it is that you do. Those costs are usually more than our charges – it’s quite a complicated subject.
People do worry that they’re paying too much and that the costs aren’t clear. But it’s important to know that 9 times out of 10, we can usually reduce the cost of what a client has in place – including our charges. When you make your own arrangements it’s easy to overpay, which is how we can usually reduce those costs.
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You might be worried that you don’t have enough, or be embarrassed by something you’ve done – perhaps your pension or investment has gone down in value. But everybody’s in the same boat.
Don’t worry we’re here to guide you through that.
How can a financial adviser help?
Wealth Management is about all of your financial affairs working together. We simply try to maximise the amount of money our clients make and minimise their risk.
It’s also about having the right rate of interest on your mortgage. It’s about redoing your deal when that ends. It’s about making sure you have the correct pension at your current stage of life. It’s about having your growth investments in an environment where we can eliminate or lower the amount of capital gains tax that you pay. We help make sure your income-producing investments are in a place where income tax isn’t punitive.
When you add up all the things that we can do over a period of time, the financial difference we can make to somebody’s affairs is substantial. We treat every single client as a holistic case. We might only be doing something on pensions, but we will always look at their overall position.
People tend to deal with pensions only when forced to. That might be when they get an annual statement and see that it’s gone down in value. Most people leave their financial affairs alone and assume that 25 years down the line it will all be fine – but the truth is that isn’t correct.
You have to be on top of that arrangement all the time. That’s what we do as a wealth manager. It’s our job to be on top of it. The service we provide does make a real difference. The worst thing you can do is just hide away and hope it’ll be alright in the long term. With a pension in particular, if you are retiring in a year where Donald Trump has just become president or the pandemic has just hit the world economy, that can offset five or six years of your pension savings in the space of three months. You need a plan that works to minimise those effects.
What would you say to somebody that thinks wealth management is just for the wealthy?
I understand the barrier to entry. You might be worried that you don’t have enough, or be embarrassed by something you’ve done – perhaps your pension or investment has gone down in value. But everybody’s in the same boat.
One of the big differences with us is that we avoid arrangements that you can’t get out of. We learned years ago that at stressful times in the economy, clients want to take their money out of an investment – but suddenly the fund manager has closed that fund. It’s happened time and time again. So we avoid any kind of arrangement where you can’t sell and get your money back out.
Where we’re concerned, fees stop when somebody tells us to stop. You will never be locked into an arrangement with us. Once we’ve got a client we do tend to keep them, and that’s what we aim for. But nobody’s ever tied in.