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Wealth management isn’t just for the ultra-wealthy. While many firms tend to cater to clients with significant assets, anyone can benefit from smart wealth management practices. These services provide tailored financial advice to meet individual needs. Although wealth management often best serves those with investments ranging from $2 to $5 million, its advantages can extend far beyond that group, offering value to a wider range of people.
According to the Bureau of Labor, there are an estimated 264,000 personal financial advisors in America. Though that number seems quite large, only 35 percent of Americans employ a financial advisor. Although financial literacy can be an intimidating concept, it is also one of the most important concepts to master if you plan to live a healthy financial life. Engaging in an investment strategy early in life is tantamount to a wealthy client enlisting a wealth management firm to handle their assets; both can serve you well in the long run.
- Wealth management is a comprehensive approach to managing investments, financial planning, and other aspects of one's finances.
- It can include services such as portfolio management, tax advice, retirement planning, estate planning and more.
- Wealth management professionals seek to provide personalized solutions for clients while helping them achieve their long-term financial goals.
- Wealth managers often assess clients' current financial situation to develop strategies that are tailored to their individual needs and objectives.
2 Types of Wealth Management Financial Services
Estate Planning
There are various financial welfare services available, including estate planning. Estate planning involves assessing and organizing the transfer of assets to beneficiaries in preparation for death. The primary goal is to preserve wealth for intended recipients and provide flexibility for the individual before their passing.
A crucial aspect of estate planning is establishing a financial power of attorney. This individual acts as a representative responsible for managing your finances if you are unable to do so, particularly following your death. In addition to distributing assets to beneficiaries, the financial power of attorney handles tasks such as banking, bill payments, and insurance claims.
Different levels of power of attorney exist, including limited and general. A limited power of attorney restricts the agent's authority to specific assets, while a general power of attorney allows them broader decision-making capabilities. This grants the agent greater freedom in managing assets and providing care.
Robo-Advisor
Most young people who might not qualify financially for estate planning services would benefit from a robo-advisor. Robo-advisors are a type of online tool that offers financial planning advice to people with minimal human interaction. This kind of automated wealth management is able to run because of mathematical rules and algorithms and it usually requires no minimum investment.
The advanced software used by robo-advisors is capable of building and managing investment portfolios. With little or no human interaction necessary, these advisors offer services from automatic rebalancing to tax optimization. Most have human representatives available for questions, when that service is requested.
How Does Credit Factor into Wealth Management?
A credit score is a number, ranging from 300-850, which represents the likelihood that a person will repay their debts. This number is factored by three major credit bureaus: Transunion, Equifax and Experion. The vast majority of banks and lending institutions use the scores that are generated to determine to whom they will loan their money and at what interest rates.
There are different levels of credit and they range from poor to excellent. A FICO® credit score in the 700s or 800s is considered very good to great. While experts say that you need a minimum credit score of 660 to go car shopping, they also agree that walking in with a score that's higher than 800 will get you the best deal. This is because the dealership wants your business because the bank is letting them know that you'll likely pay on time, every time.
Credit matters to everybody. Good credit allows a person to borrow greater amounts of money at lower interest rates while bad credit does the opposite. Banks have reservations about making loans to people with a bad credit history and poor credit scores and when they do, they offer high-interest rates. Managing your credit habits in a way that establishes and maintains a strong credit score is one of most people's first steps into wealth management. If not done correctly, you can see your options dry up quickly.
Your credit score is the difference between financing the car you want or settling for something cheaper. The words 'more affordable' aren't really apt in this scenario because it's not whether or not you can afford the car, it's how you've demonstrated your ability to do so with other objects in the past. Many people get their first credit cards when they go away to college and this is a particularly stressful and dangerous time when it comes to setting up your financial stability.
How Do You Establish and Maintain Good Credit?
A key to maintaining good credit is diligence. You must pay your loans on time, every time they come due while maintaining some distance from your credit limit. A long credit history will help your score, so making big purchases from time to time can be beneficial, if properly planned.
Read more >>> What is a Good Credit Score?
What's the Best Way to Think About Wealth Management?
Wealth management might be thought of as a financial service that takes a holistic evaluation of your financial picture. The service is associated with wealthy clientele who have a portfolio that needs to be managed by professionals who have a deep understanding of the many fields within finance as well as the trends of the markets.
However, everybody should be actively engaging with their own financial health. In this regard, there are many ways to practice different kinds of wealth management, from obtaining the right college loans to working with robo-advisors to tax planning. When you take the time to study your options, your decision-making process improves. At its core, wealth management is about using knowledge to make decisions. The third factor is experience.
Why Wealth Management is for You
Wealth management starts earlier than you think. For most people, living comfortably and retirement planning are the objectives, so you actually begin managing your wealth the first time you receive a paycheck. Then, as you earn and invest your money, you'll begin developing your assets. Investing in higher education is another important step to establishing a favorable financial situation down the road.
