Moneytree Wealth Management

Am I rich enough to hire a wealth management advisor?

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As individuals become wealthier, their financial situation often becomes increasingly complex. Those on low wages and with few assets often have relatively simple needs: to pay off high-interest debt, max out their workplace pension, save more, and make some basic investments.

Of course, it’s not as simple as that for some people. This makes the answer to “Am I rich enough to hire a wealth manager?” a relatively difficult one, as there’s no single wealth prerequisite. What we do know, though, is that it’s common to overlook professional wealth management because you wrongly assume you’re not rich enough.

Are there minimum income or wealth requirements?

Certified wealth managers tend to earn their money by charging a percentage fee. This means it’s not lucrative for them to be taking on clients with a small amount of wealth. Data from before the pandemic in 2019 saw a drop in the number of wealth management advisors taking on clients with less than £100,000 in investable assets. 

Minimum asset and/or income requirements change between wealth managers, though, with many accepting individuals with a portfolio under £100k - whilst some simply charge per hour and do not have minimum requirements. Those with an income of £100,000 and/or household assets around £150,000 is often where we begin to see individuals realise that a wealth manager is needed. But, in truth, you can still benefit from advice with a smaller portfolio than this.

When does personal wealth planning become too difficult to manage by yourself?

There has been a significant rise in retail investing during the pandemic, and it has led to many believing they’re the next Warren Buffett. It’s true that a young professional, earning £50,000 a year, can simply invest their savings into an index fund and receive the average market returns. That’s great, and cheap, but issues arise as their wealth, tax liabilities, and pension requirements grow.

Perhaps you have early retirement goals, or you’re looking to release some equity in order to raise capital or cash. These decisions surrounding remortgaging, pensions, and estate planning can quickly become very complex - a far cry from the direct debit to an index fund.

So, it makes intuitive sense that the larger your portfolio is, the more in need of a second opinion you are. In fact, it’s relatively easy to be highly aggressive in your investments - the index fund strategy works fine in isolation. But as the stakes grow, your position may require better risk management and contingency.

This is where wealth managers really offer value: helping you manage risk whilst achieving your goals. So, it’s not just getting great returns and building wealth, as it can simultaneously be viewed as a form of insurance; a payment to help mitigate unnecessary risk. Though, it should be pointed out that Vanguard's research estimated that wealth managers can add up to 3% in relative return to investors. 

It’s somewhat up to the individual to determine if their situation, and wealth, is in need of professional advice. Usually, individuals overestimate their own ability to make good financial decisions. It’s also important to note that there is no substitute for expertise. No amount of robo-advisors or online advice can ever cater to the specifics of your needs in the same way.

For some people, they may first consider a wealth manager when buying a second home. For others, they simply want to know how best to go about retiring early and optimising pensions. Wealth managers are becoming increasingly accessible and versatile, so they’re no longer reserved for multi-million pound estates like they’re often perceived to be.

Reasons to find a wealth management advisor near me

For those on the fence about if they have enough wealth to warrant a wealth manager here are some more factors to take into consideration:

Having a job

Unless you’re retired, it’s likely that you’re working full-time. This is great for building more wealth, but it’s bad for managing it. This means that you’re spending most of the day focused on your job, and not researching how best to manage your assets.

Whilst some people spend their leisure time reading about investing, this isn’t an ideal situation for most. In fact, you should be viewing your leisure time as the opportunity cost that it really is. These are the hours that you have valued more than working (otherwise you would be working a second job). So, when considering the payments for a wealth manager, remember to factor in the free time that it’s rewarding you with - and the relief from stress.

Reassurance and objectivity

A wealth manager is always going to be a better investor than you. Not just because of their experience and expertise, but simply because it’s not their money. Managing someone else’s money is a much easier task, as it removes all sentiment and emotion.

This is necessary to make rational decisions. Many do not realise how difficult this is until there’s an economic crash, their portfolio is down 35%, and their early retirement is in jeopardy. These are the moments we need a reassuring second opinion to help us stay on track with our long-term strategy. It’s why the best boxers in the world still have cornermen - their objectivity spots things that we miss because of ego, emotion, and cognitive bias.

Your wealth is growing

Whilst it’s not exactly an inevitability, your wealth is likely growing as we speak. There’s currently a strong bull market and you may be earning good money which you’re tucking away. So, if you feel like you’re on the fence about needing an advisor in regards to having enough wealth, you’re likely going to need one at some point given your trajectory.

Onboarding sooner can simply mean building a relationship with your wealth manager for longer. This way, they have more time to learn about your needs, desires, and financial situation. It can also mean that you’re more likely to continue on this trajectory because your portfolio exposure and risks will be better managed, particularly in the event of an impending crash. Personal wealth management can appear easy during a bull market - until it isn’t.

 

Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.

The value of investments can fall as well as rise. You may get back less than you invested.

Taxation advice and Estate Planning are not regulated by the Financial Conduct Authority.

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Neither Moneytree Wealth Management Ltd nor Quilter Financial Planning accept responsibility for the accuracy of the information on this site.

Mark Fletcher

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