Wealth Manager fees and costs
A wealth manager is a finance professional who usually works with clients or families of high net worth. They encompass a full spectrum of financial advice and services, and the average UK management fee is around 1-1.5% of the size of your asset portfolio.
What is a Wealth Manager?
A wealth manager provides comprehensive consultative services around the finances and investments of their client. This can include managing investments, planning for expenses, tax efficiency management, and bespoke advisory services.
Most wealth managers work for affluent clients, and some have a minimum net worth that they will work with. Other wealth managers represent families and may charge an inclusive fee for managing all family members' assets and wealth.
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How Much Does a Wealth Manager Cost?
The costs of a wealth manager will vary considerably since this often relates to the size of the portfolio they are managing, how much involvement they have in making investments, and the number of clients they are working on behalf of.
Typically, wealth manager's fees split into several sections:
- Management fee is the cost of running a portfolio and is usually between 1-1.5% per year.
- Fund manager fees - if your investment portfolio is part of a fund including 3rd party finances, there may be underlying investment costs to bear in mind.
- Taxes - typically, wealth managers will be subject to VAT which means an additional 20% will be added to each invoice.
- Stamp duty - if your portfolio includes any electronic share transactions, these may be subject to Stamp Duty Reserve Tax (SDRT).
- Transaction fees - additional fees depend on the nature and frequency of account transactions and are usually excluded from management fees. These cost around 0.5-1.5% of the value of the transaction.
- Custody fees - there may be private banking fees payable on your deposits, which are usually around 0.2% per year.
- Nominee costs - wealth managers often hold client securities in nominee accounts, which may carry additional administrative costs.
- Brokers fees - if a broker is required to conduct any trades, their prices will typically be around 0.05-0.2% of the transaction value.
- FX fees - for deals converted from a different currency, there will be foreign currency commission charges payable.
- Performance fees - many wealth managers receive a bonus, which is a percentage of the value by which they have increased your asset portfolio.
As you can see, there are many costs and charges associated with using a wealth manager. One of the best ways to keep track of this cost is to ask for the Total Expense Ratio (TER), which will show you the total charges paid across the account activities, concerning the value of the portfolio.
This is comparable to an APR when comparing different types of lending. A comparable TER from different wealth managers is an excellent way to gauge an indication of the anticipated costs.
What Does a Wealth Manager Do?
While much of the work of a wealth manager might be around investments, they offer advice and independent services across all aspects of your finances.
- They may act as your advocate, or compare different products and options from the market on your behalf.
- A wealth manager may appoint independent experts where required for you - such as a solicitor or accountant.
- They will create strategies for the short and long-term to plan for your financial management requirements effectively.
- They provide bespoke advice about every aspect of your finances - such as retirement planning, tax-efficiencies, and budgeting for significant outgoings.
What are the Benefits of using a Wealth Manager?
Whether or not a wealth manager is the right finance professional for you will depend on your portfolio value and your goals. If you have a high net worth and would like a dedicated advisor to manage your finances than a wealth manager can provide numerous benefits.
These include things like:
- Managing all of your finances and investments in one service.
- Giving you back the time you spend managing your finances and budgets.
- Making careful investment decisions on your behalf and acting quickly when opportunities or risks arise.
- Providing an expert opinion, taking the stress out of making important decisions.
- Advising on the most lucrative investment opportunities, and how to conduct your finances in the most cost-effective way.
For seeking financial advice more generally, take a look at our financial advisor cost page and the different factors that influence it. If you are looking for financial support with regard to running a business specifically, take a look at our small business accounting costs article.
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Frequently Asked Questions
What is the Difference Between a Financial Planner and a Wealth Manager?
It is quite tricky to identify the difference between financial professionals. It is easy to confuse a financial planner with a wealth manager since both provide advice and financial support.
However, a financial planner generally assists with planning for budgets and lifestyle events and helps manage issues such as debts. They usually work with clients of all incomes and are an accessible finance professional for most people.
Wealth managers tend to work with more affluent people, and many have a minimum net worth that they will consider when taking on a new client.
Financial planners manage finances, and wealth managers manage wealth.
What is the Minimum Net Worth to Appoint a Wealth Manager?
This depends on the firm and what sort of services they provide. Some of the larger wealth management firms may accept clients with a net worth of around £250,000. Other firms specialise in high-end investment portfolios, and may only work with clients of a much higher net worth.
Wealth managers in prestigious locations may only work with clients who are millionaires and above, and some with even higher thresholds.
How Do I Choose a Wealth Manager?
The prime consideration when choosing a wealth manager is to have confidence in their skills, experience and ability. A wealth manager has control over the majority of your finances, so it is essential to take your time and only appoint a wealth manager when you are confident they are the right fit for you.
Consider asking questions such as:
- Whether they have experience in managing portfolios of a similar size and nature to yours?
- Which investment sectors they specialise in?
- Whether they are willing to share client reviews and testimonials - or even refer to an existing client who would be happy to share their experiences?
- How much they charge, and whether they are prepared to share an indicative, annual cost?
- Which professional and regulatory bodies they are registered with?
- How long they have been trading and how much experience they have in the wealth management sector?
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