Wealth Management 101

wealth management

When I was asked to write an article comparing financial management firms it took me one google search to realize that before I mention or list any company name I have to discuss the different categories of organizations there are. The management or investment of one’s hard earned or easily earned money can take various avenues that many of us do not realize as we get entangled in the semantics of labels. 

What does it mean to manage one’s money or wealth? And what constitutes wealth for an organization to manage? Do we want a DIY (do-it-yourself) approach where we go online and trade stock from our computers or phones while relying on the well meaning advice of online cohorts and friends or do we want a more formal approach or a combination of the two? Who and how do we find a more traditional approach of trained professionals? I was surprised by the subtle distinctions several searches in. Even the movies Wall Street, The Wolf of Wall Street, The Pursuit of Happyness, and Boiler Room did not properly prepare me for the distinction between what type of firm manages whose money. 

Let’s dive in and discover the world of managing one’s money if, and only if, one has money they wish to manage. What is implied in the management of money is that the money (or holdings) does not decrease in value and the intention is that it increases. Sadly a reality does remain that most people live from paycheck to paycheck and hope for the best. Perhaps this article can give some insight into ways anyone at any level can begin to invest in their future. https://www.fool.com/retirement/2019/08/11/most-americans-are-living-paycheck-to-paycheck-sur.aspx


So what does the world of money management look like?

Does it look like any of these?

I only hope it looks more like Will Smith’s character than Charlie Sheen’s.  Yet, is there much reality behind the corruption? Is the setting similar? Let’s first explore what’s out there or who. 

The first distinction we may want to make is the difference between a brokerage firm and a wealth management firm.

Wealth management is full service. Wealth managers cater to people with high net worth and are experts in more than just investments. Where stockbrokers are experts in investments, making recommendations to choose from they do not necessarily advise on a broader range of financial concerns. 

“Wealth management is very straightforward. From the affluent individual’s perspective, wealth management is simply the science of solving/enhancing his or her financial situation. From the financial advisor’s perspective, wealth management is the ability of an advisor or advisory team to deliver a full range of financial services and products to an affluent client in a consultative way.”

Wealth management is delivered in a consultative fashion creating a client centered strategy which serves the clients needs and wants. 

“While it is common for a wealthy individual to be sitting with a wealth manager to address a particular need (investment management, say), the consultative wealth manager’s overriding objective is to understand the person and find out what’s important and why. Then the wealth manager is able to bring in the appropriate experts and provide the appropriate financial products.”

So that is a wealth manager. I then stumbled upon the term asset manager. And I thought to myself how would that be different? Is not wealth an asset? 

From the following article https://ingrams.com/article/investing-101-asset-managers-vs-wealth-managers/

I extracted this simple definition: “In the broad view, there are two main types of firms: Those that focus first on management of investment assets (asset

management), and those that focus first on the strategy surrounding the total wealth of a family (wealth management).”

As a lay person taking a complete guess after reading just the words I would take that to mean a wealth management firm is focused on family (or as one could lovingly say those members – human or pet – who are linked to the money) and the management of their needs present and future as a variable to factor into the investment strategy for the money versus an asset manager whose focus is funds first, meaning the individual or family members do not need to rely so much on the money in the moment. 

I read on. These are passages that stood out to me from various websites: “Again, in contrast to asset management, wealth management centered firms typically delve much more deeply and assist with non-investment-oriented prioritization of family goals and objectives. They often define real risk-adjusted rate of return requirements to meet those goals; determine the appropriate role of debt; show how to maximize the productivity of income; minimize the impact of taxes on family assets; explain strategy to protect income, cash flows and assets with insurance; and coordinate multi-generation family and estate issues.” https://ingrams.com/article/investing-101-asset-managers-vs-wealth-managers/

“An asset manager will determine which investments are the best-suited to your financial situation. This means they’ll help you with things like asset allocation, or choosing how to divide your investable assets among different asset classes. Namely, this entails determining what percentage of your portfolio should be growth products, like stocks, and what percentage should be fixed-income products, like bondshttps://smartasset.com/financial-advisor/asset-management-vs-wealth-management

“While asset management focuses on investments, wealth management takes a much broader view. Wealth management is about looking at an individual or family’s overall financial situation and taking steps to maximize their wealth and protect it down the line. https://smartasset.com/financial-advisor/asset-management-vs-wealth-management

“While asset management is focused on growing an investor’s money, wealth management looks more holistically at a client’s overall financial situation and takes steps to ensure their wealth will be protected over the long run.” https://smartasset.com/financial-advisor/asset-management-vs-wealth-management

“The asset managers advise on asset allocation, new investment opportunities, risk-return analysis, portfolio strategy formulation, etc. Thus asset management is only concerned about the best way to invest and manage one’s money while other financial issues of the client like tax planning, cash flow planning, estate planning etc. are left for the client to figure out.” “The aim of wealth managers is to grow the wealth of investors as well as providing advice for future planning. Wealth management service is especially useful for those who are nearing their retirement to assist them in all their future financial requirements.” https://www.educba.com/asset-management-vs-wealth-management

So, it looks like the nail is still in the wall on that one as far as my guessing goes. And we can move on to where a stockbroker or brokerage firm fits into this. But before I do the distinction in how an asset management and wealth management firm gets paid is worthy of mention because as a lay person watching those Hollywood clips I wonder if commission could weed in some less savory sorts? 

“Compensation for asset management firms is traditionally based on commissions, but a growing number of firms are now moving to a “fee based” or fee for assets under management model. Compensation for wealth management firms has traditionally revolved around the use of retainer fees and/or a fee for assets under management, rather than commissions for product sales.”

“Asset managers generally earn money based on a percentage of assets under management. Rates will often be progressive and decrease the more money an asset manager oversees for an investor.”

“Wealth managers are also often paid through a percentage of assets under management, though some are paid a flat or hourly fee.”

I do not know if I would want to be billed hourly. How can one calculate or justify the return on investment against the hours spent on the portfolio? But again, I’m a lay person, simply musing.  

Where does a stock brokerage firm fit in? And why? And if not to confuse you even more there is yet another branch on this investment guru tree and that is called investment advisor firm (or client firms) and or money managers which begs the question: stock broker or client firm/ investment advisor or money managers? But upon further perusal it appears to me that these terms are  jargon for various degrees of wealth or asset management so rather than go down the rabbit hole of technicalities I will link the subtleties here in two websites I found informative and describe the job of a stockbroker only. https://fourstarwealth.com/brokerage-vs-client-firms-difference 



So who is a stockbroker? Is it someone like this?

Or someone like these two clips?

A level of trustworthiness and integrity is important when it comes to employing somebody’s services whose livelihood depends on sales and commissions. 

“Stockbrokers are people that, based on passing various state- and federal-mandated exams, can work for a stock brokerage firm that opens investment accounts for the public.” 

While there are online stockbrokers only full service stock brokers can give advice about what investments to buy and sell. Online stockbrokers can only take orders and open accounts. 

“Before online trading, accessing a broker was traditionally a luxury reserved for the rich. Individual investors had very little or no direct access to the market and had to place their orders through a licensed broker (usually by phone). In return, brokers charged very high commissions. However, the advent of web-based discount brokerages has changed the job of the broker.”

“Now, individuals who wish to trade on the stock market no longer require a broker on standby to execute their buy and sell orders and can have direct access for as little as pennies in commissions. Although brokers still execute orders, many have expanded their services to personalized investment management to justify charging higher commissions.”

The entire industry is highly regulated and the higher the standard the individual or entity is held to and the more licencing and testing one has under their belt the better for the client it would appear. Although brokers still work for their companies and the loyalty is to sales.

“These days, it’s not uncommon to see brokers dual-registered as investment advisers. Brokers may also be involved heavily as part of a sales team in private placements, initial public offerings (IPOs), or secondary issuances. Working alongside their firm’s corporate finance departments, brokers may work to sell their clients on a hot new issuance or private deal to help a company raise capital. In return, the broker may receive a commission, shares, or warrants in the issuing company.”

“Investment advisers and brokers also have different training and licensing requirements. Brokers have to pass the Series 7, otherwise known as the General Securities Representative Exam; the Series 7 also acts as a precursor to further exams in the securities industry. On the other hand, future investment advisers must pass the Series 65 exam, which is a requirement before they can dispense financial advice for a fee.” 

“An additional distinction between the Series 7 and the Series 65 is that only the Series 7 requires an individual to be sponsored by a firm prior to enrolling for the test. The Series 65 is also often used by certified public accountants (CPAs) to enter the investment advisory business. Unlike chartered financial analysts (CFAs) and certified financial planners (CFPs), the CPA designation does not meet the prerequisites to have the Series 65 exam waived.”

Ultimately a stockbroker may remain more limited in scope than an asset manager or wealth manager. 

“Selecting a stockbroker usually means you’re getting more limited money management services, depending on the type of brokerage services offered.”

With all this information swimming around in your head and scenes like this keeping you from so much as investing monopoly money how does one find a trusted financial consultant? https://www.youtube.com/watch?v=rylwgRSgjG0

I found these two links helpful in providing some tops and advice:



 What I can say is to interview and research the firm and the person and do not be afraid to ask questions. They work for you, not the other way around.  It is your money. Which brings me to list some of the major firms in the industry and highlight one or two as examples of what a nationally known wealth management and brokerage firm looks like. 

As recent as December 2020 investopedia.com has listed the following ten companies as the biggest and best of the wealth management firms https://www.investopedia.com/articles/investing/061314/best-best-wealth-management-firms.asp

1. UBS Wealth Management

UBS Wealth Management is ranked number one on the list, with $2.6 trillion in AUM.1 Although UBS is a Swiss company, it operates in over 50 countries and from all major international financial centers. UBS has 286 branch locations in the U.S.

In the U.S., UBS financial advisors offer planning, investing, and banking services and private wealth management for individuals. For companies and organizations, UBS financial advisors can help with financial wellness, retirement plan services, equity plan services, institutional consulting, and workplace insights.3

2. Credit Suisse

Credit Suisse is ranked second on the list, with $1.25 trillion in AUM.1 Like UBS Wealth Management, Credit Suisse is also a Swiss company.

Wealth management solutions at Credit Suisse include preserving, accumulating, or transferring wealth. Previously, the company had investment-banking professionals in offices in Boston, Chicago, Houston, Los Angeles, New York, and San Francisco.4 However, in January 2015, Credit Suisse announced that it would be exiting its private banking and wealth management services in the U.S. The company offloaded its U.S. wealth business to Wells Fargo in the same year. 5

3. Morgan Stanley Wealth Management

Morgan Stanley Wealth Management ranks third on the list with $1.24 trillion in AUM.1 Morgan Stanley has 250 advisory firms that are committed to helping clients grow their financial, family, and social capital.

Morgan Stanley Wealth Management operates in all 50 states and Washington D.C. It has more than 15,600 wealth managers in nearly 600 branches.6

4. Bank of America Global Wealth & Investment Management

Banks of America Global Wealth & Investment Management (comprising Merrill Lynch Wealth Management and Bank of America Private Bank) ranks fourth on the list with $1.22 trillion in AUM.1

Bank of America offers investment management for individuals and families. Services that the company provides include portfolio management, access to capital markets, specialty asset management, and sustainable and impact investing.

The Global Wealth & Investment Management division focuses on two types of clients: people with over $250,000 in total investable assets and high-net-worth individuals for whom Bank of America can provide comprehensive wealth management solutions. It has more than 20,000 wealth managers in 750 branches.7

5. J.P. Morgan Private Bank

J.P. Morgan Private Bank ranks fifth on ADV Ratings’ list with $677 billion in AUM.1 Advisors, strategists, and investors at J.P. Morgan help individuals create custom financial plans and help achieve those goals. The company employs specialists who are focused on investing, banking, lending, and trusts and estates.8

6. Goldman Sachs

Goldman Sachs ranks sixth on the list with $558 billion in AUM.1 At Goldman Sachs, clients work with private wealth management teams to select from investment vehicles covering the entire asset spectrum—including cash, fixed income and equities, as well as a range of alternative offerings such as private equity and hedge funds.

Goldman Sachs’ Investment Strategy Group (ISG) can also provide guidance to individuals on asset allocation and portfolio diversification. The company’s Wealth Advisory Group can also assist clients in estate planning, gift planning, generation-skipping tax planning, and philanthropy. It has 500 wealth managers operating in 13 branches.9

7. Charles Schwab

Charles Schwab is ranked seventh on the list of wealth management firms, with $506.3 billion in AUM.1 Charles Schwab offers wealth management services through an entire team of advisors, called Schwab Private Client. These advisors consider individual clients’ retirement income planning, estate planning, and insurance needs. A dedicated member of a clients’ team is also tasked with monitoring a portfolio and suggesting adjustments as the market changes.

The company employs over 2,000 wealth managers and has over 345 U.S. branch offices.10

8. Citi Private Bank

Citi Private Bank is ranked eighth in ADV’s list of the world’s largest wealth management firms.1 Its AUM is $500 billion. Citi Private Bank offers services for professional investors, wealthy individuals, family offices, and lawyers and law firms. Citi maintains an extremely high ratio of advisors to ensure that every client’s portfolio gets the attention it needs. They craft customized investment strategies and help entrepreneurs, wealthy individuals, sophisticated investors, over one thousand family offices, and the legal profession with global banking and investment services.11

9. BNP Paribas Wealth Management

BNP Paribas Wealth Management ranks ninth in this list, with $424 billion in AUM. 1BNP Paribas’ Wealth Management experience includes providing its clients with a portfolio that matches their long-term goals. The company’s team of investment strategists can manage, diversify, or personalize your financial portfolio, as well as provide advice for a wide range of solutions.12

10. Julius Baer

Julius Baer ranks tenth in this list, with $423.5 in AUM.1 Advisors at Julius Baer, together with a broad network of external experts, provide a holistic approach to managing wealth, from financial planning, wealth structuring, retirement, taxation succession, relocation, and philanthropy

Julius Baer employs a staff of over 6,700 worldwide. The group manages assets for private clients from all over the world. 13

The “key takeaways” with the above mentioned firms are:

“High-net-worth individuals often seek a professional to manage their money. While size isn’t everything, a large sum of assets under management is a signal that the firm attracts an affluent clientele.The rankings here reflect the top 10 investment management firms by assets and net income.” 

I asked myself if wealth management firms can overlap and act as brokerage firms. I got my answer in the very next search. https://www.investopedia.com/articles/professionals/110415/biggest-stock-brokerage-firms-us.asp

“There are dozens of stock brokerage houses in the United States. But four major firms stand out because of their name, offerings, their total amount of client assets, and the number of clients they serve. They are often referred to as the “big four brokerages.” Each of these firms—Charles Schwab, Fidelity Investments, E*TRADE, and TD Ameritrade—comprise the top in terms of customers and assets.”

So how is it that Charles Schwab is both a wealth management firm and a brokerage house? 

“Charles Schwab & Co., Inc. is a fee-based financial advisor firm that offers a number services, including investment management, financial planning and a robo-advisor. With more than 2,100 employed advisors and $3.56 trillion in assets under management (AUM), Schwab easily ranks among the largest financial services companies in the U.S.”

“Because Charles Schwab offers such an expansive array of services and has a wide network of advisors and partnered independent advisory firms, the company doesn’t necessarily abide by a singular investment philosophy. With that being said, Schwab as a whole emphasizes diversification. This principle dictates that clients’ assets should not only be invested across the market, but also throughout varying investment types. Generally, Schwab uses some combination of stocks, bonds, mutual funds and ETFs in client portfolios.”

Nerdwallet.com gives Charles Schwab a thumbs up for beginner investors for ease of use and the company’s $0 account minimum. https://www.nerdwallet.com/reviews/investing/brokers/schwab-brokerage

There is one more name I think it worth mentioning: The Vanguard Group. https://en.wikipedia.org/wiki/The_Vanguard_Group

The website Benzinga.com listed Vanguard as the best investment firm for personal finance with Charles Schwab coming in second as best for ETFs. https://www.benzinga.com/money/best-investment-firms/

 Vanguard also has the do-it-yourself  online ability to buy and sell funds, stocks, and ETFs just as Charles Schwab does. Vanguard may have a twist though that frees the company up from answering to shareholders:

“Unlike any other investment company, Vanguard was built to create wealth only for you, our clients. We have no outside owners, which means we have no shareholders to placate.”

All in all there seems to be overlap in many of these firms and clients have options when deciding how to take control of their finances. It’s important to determine what your needs and goals are for the present and future and what your tolerance for risk is. 

If you are going to go the complete DIY route through any of the online investment platforms any wealth management or brokerage firm offers before you dive in, books on the subject are always a good purchase before you make the bigger investment.  I like “How to Make Money in Stocks” by William J. O’Neil https://www.tradestation.com/insights/2020/08/04/book-review-wiliiam-oneil-how-to-make-money-in-stocks/ and “A Random Walk Down Wall Street “ by Burton G. Malkiel is another good choice https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street or something from this list https://www.thebalance.com/best-investing-books-for-beginners-4687249

In full disclosure this writer has both a Vanguard, Charles Schwab, and Robinhood account where I do-it-myself with no asset management. But I will say the telephone customer service for both Charles Schwab and Vanguard are both excellent. I can’t speak to Robinhood yet as my account is too new. I am receiving no bonuses from any of the companies or books I mentioned. This article is for informational purposes only. And in that spirit in the words of my favorite Star Trek character, “Live Long and Prosper”.

Author: Sherri Margolin (Dark Matters)

Disclaimer: Absolutely nothing you read in here should be taken as investment advice. The discussion of securities and ideas is never to be considered a recommendation to buy or sell any.  Always do your own due diligence.

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