The term "wealth management" came into existence during the 1990s but as the number of millionaire households in the U.S. and around the world continues to climb, wealth management as a specialized practice is in danger of being diluted. The bank trust department of old is now called "Private Wealth Management" and hosts of financial advisors are now

"Wealth Managers." But has anything truly changed in what we are providing our clients?
Traditionally, wealthy clients have sought financial advice from a variety of sources: bank trust departments, brokerage firms, insurance agents, as well as personal attorneys, accountants, and then advisors. As the term "wealth management" entered the financial services vernacular, virtually all of these providers adapted the word "wealth" into their business names and titles. Many planners have also successfully shifted the focus of their practice entirely to wealthy individuals and enjoy the tremendous benefit of serving fewer clients with more assets. With the remarkable increase in wealth, it is easy to see why so many firms and advisors have taken steps to attract this compelling and ever-growing market.  
What is most critical today is that the marketing message matches the expertise and capabilities. Just hanging the tag "wealth manager" on a business card does not instantly qualify one to address the complex and changing needs of a wealthy client. The industry must set higher standards for wealth managers and be clearer in its definition of who it aims to serve or run the risk of having the term "wealth management" dismissed by potential clients as mere marketing.  

So what is wealth management and what should we be delivering to clients?  

Many "wealth managers" have evolved into their current roles over the course of their careers, having started in the financial services industry as specialists in a specific product such as investments or insurance. A firm or individuals holding themselves out as wealth managers should be certain that they have the resources and capabilities to deliver fully integrated, customized solutions that address each client's or family's specific needs.  

Sustaining wealth beyond one generation is a challenge-especially when a family and its interests have a global, multigenerational reach and possibly divergent goals and aspirations. Income taxes, gift taxes, estate taxes, generation skipping transfer taxes, prolonged illness, claims of creditors and others can erode a family's assets.  

Offering objective advice and strategic solutions can help keep assets working from one generation to the next and mitigate the biggest risks to a clients' wealth, now and in the future.

Keys to Success

Here are four important characteristics that wealth management firms should have:

A direct and in-depth understanding of a client's needs, both financial and nonfinancial-no detail should be viewed as insignificant. Complete knowledge of a client's situation-from professional goals, risk tolerance, and existing structures and tax circumstances to family considerations, personal hobbies and aspirations for future generations-needs to be a vital part of the planning process. This information is critical to building an integrated plan that considers a client's full set of needs over time. For example, families often want to better control gifts to children or grandchildren to ensure family wealth is protected from one generation to the next. Other individuals may have aspirations to create a family legacy, using various charitable giving vehicles such as family foundations or donor-advised funds. Understanding these goals and how to create and execute strategies that address these very unique needs is the foundation of the wealth management practice.  

The ability to combine structure with flexibility based on the changing needs of a client so that a formulaic one-size-fits-all approach is avoided. No two clients are alike and the complex needs of affluent clients require customized solutions rather than product-lead strategies. Model portfolios don't account for such variables as a client's tax consideration, preferences, concentrated positions, timing and other assets. Customizing a client's portfolio addresses their evolving needs and provides them with a tax-effective solution based on their specific situation. It should incorporate a holistic view of all of the client's assets. The wealth manager should have access to and an understanding of global investment capabilities. Everything from individual stock selection to appropriate asset allocation and alternative investments must be carefully evaluated and monitored in order to be responsive to clients' individual needs and circumstances.  

The capability to offer strategic planning and a collaborative approach using in-house experts as well as outside professionals (i.e. attorneys, CPAs, insurance agents, realtors, etc.). Wealthy families need to address intergenerational wealth transfer challenges; to employ well-structured estate-planning techniques; to avoid unnecessary estate, gift, capital gains or income taxes; to receive proper management around concentrated positions; and to get good communication from their advisors. Some firms, such as trust and estate lawyers, insurance experts and tax specialists, may already have this in-house expertise. Other wealth managers may need to establish external partnerships. But it is important to know when to bring in outside experts and have them readily available. No single person can effectively deliver a wealth management solution on his own; utilizing resources outside your specialized area will help you maintain a wealth management program tailored specifically for your client's objectives and constraints, one that can adjust as the situation evolves.  

An on-going process with a client that identifies critical goals, creates solutions to problems and confirms the client's satisfaction with the outcome. Goals and priorities change. Don't assume that your client will think to call you when a significant career or family event occurs that could dramatically alter how their wealth management plan should be structured. Major life events, like marriage, divorce, births, deaths, retirement, sending a child to college, as well as significant decisions-buying a home, changing jobs and moving-often have a significant impact on an individual's wealth management needs. It is important that a wealth management plan reflects these evolving changes.  On-going communication will only help enhance and build the client relationship.

Wealth managers need to be very clear with themselves and the general public about what they do and who benefits. Wealthy individuals, families and their advisors also need to ask the right question when employing a wealth manager to ensure they're getting the services they need.

When the term "wealth management" was created, perhaps it was, simply stated, financial planning for individuals with taxable estates. But the definition, in addition to including the idea of sustaining and growing a family's wealth in a tax efficient manner over the long-term, should also include providing guidance on intergenerational wealth transfer, trust and estate planning, creating a family legacy and preparing the next generation for the responsibilities and opportunities that wealth creates. In simple terms, "wealth management" must speak to the specific and unique challenges associated with being wealthy. It is not only about managing assets, but also about the complex and nuanced process of growing and preserving wealth after-tax, bringing to bear trust, tax, estate planning and related disciplines to the management of the client's financial affairs.  Today's affluent clients typically need access to sophisticated operational and Web-based capabilities, as well as access to a large array of investment capabilities and estate-planning strategies in order to create a well-tailored, diversified portfolio. 

If we are to deliver on the high standards that we have set for ourselves as wealth managers, we must be certain that our capabilities match the expectations we set for our clients.

Peter A. Carnathan, CFP, is a senior vice president of Fiduciary Investment Management International and vice president for business development of Fiduciary Trust Company International. Michael M. Mariani is senior vice president, deputy general trust counsel and director of trust and estate services at Fiduciary Trust Company International. Fiduciary Trust Company International, a leading wealth management firm, has served individuals, families, endowments and foundations since 1931. For more information on Fiduciary Trust, please visit www.fiduciarytrust.com.