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 Canaccord Genuity Corp.

What Is Wealth Management and Why Is It Important?

Delwin Graham & Eric Brown - Sep 22, 2020
Although the practice of wealth management is easy enough to understand on its own, the benefits that it offers aren't always readily apparent. But, there's a handful of potentially life changing ones that you'll need to keep in mind.

Increasing your net worth unlocks a large number of opportunities that you wouldn't otherwise have access to. From here, you can often leverage this wealth to generate even more revenue. There comes a point, though, where proper wealth management becomes a necessity. Not everyone understands why it's important, though— or what it has to offer.

So, what is wealth management? Don't worry, we’ve got you covered. Let's take a look at everything you need to know.

So... What is Wealth Management?

As the name suggests, this process involves handling your wealth in a manner that's most conducive to its safety and growth. In general, this involves working with a professional financial planner who analyzes the wants and needs of their client before offering the appropriate solution.

The more wealth you have, the more relevant this service becomes. As such, the need for proper wealth management typically arises once someone has approximately $500,000 in investable assets. But this isn't a definitive rule— there are plenty of individuals with less money who can benefit from working with a wealth management professional.

What Are the Benefits?

Although the practice of wealth management is easy enough to understand on its own, the benefits that it offers aren't always readily apparent. But, there's a handful of potentially life‑changing ones that you'll need to keep in mind.

When implemented properly, wealth management can ensure that your money is well protected as it continues to grow. Let’s take a look at some of the most notable attributes.

Maintaining Your Wealth

Due to inflationyou're actually losing money if you simply let your wealth sit in a savings account. Although you'll accrue a small amount through interest payments, it's often negligible compared to the fall in overall spending power that your money will experience. This is one of the most attractive attributes of investing— you'll be able to have your money grow on its own to counteract this process.

A wealth management professional will ensure that you maintain your wealth's spending power as time goes on. This is especially important for those who'd like to hold onto their capital for a future opportunity.

Transferring Your Wealth

For those who have a particularly high net worth, it's essential to have a proper plan in place regarding how your wealth is allocated in the future. As such, a major component of professional wealth management services is estate planning. 

Attempting to organize this process on your own can easily result in paying far more than you need to in taxes and fees. Additionally, you may run into legal issues unless you're well versed in the associated laws. For example, you could encounter problems with a will or trust that you create if you relocate to another province. Without knowledge of this scenario, it's easy to assume that there's no reason to be concerned once the documents have been completed.

Your financial planner will ensure that your wealth is distributed based on your guidelines when the time comes.

Optimized ROI

Not all wealth management is about maintaining spending power or ensuring it falls into the right hands. Many people strive to make their money work for them and grow as much as possible. This is particularly true for high-net-worth business owners, as it's crucial for them to have a thorough plan of how they allocate their resources.

Although the exact process will highly depend on your personal needs, you'll generally benefit from the following forms of optimization:

•    Expense ratios
•    Spending strategies
•    Rebalancing
•    Asset allocation

You'll likely find that you drastically increase your overall ROI, which can allow you to reinvest into your business for exponentially greater results.

Satisfy Your Personal Goals

It's not uncommon for those with a high amount of wealth to have very specific goals they'd like to obtain. As such, it's imperative that they work with someone who understands them and is able to accommodate these ambitions.

An experienced wealth management professional will analyze the key metrics that their client wants to achieve and develop a bulletproof plan to help them get there. They'll also be in frequent contact with the client to track progress and make the appropriate changes if any are necessary.

This is something to keep in mind when deciding whether or not to pursue this type of service, as many people may be unaware of the flexibility that wealth management firms can provide.

Tax Planning 

Those who run their own companies know firsthand how convoluted taxes can be. Individuals with a high net worth also know how expensive they can be as well.

Unfortunately, the reality of receiving returns on your investment is paying taxes on the gains as you withdraw them. Fortunately, an experienced financial planner can help minimize the amount that you pay as much as possible.

They'll also develop a solid withdrawal strategy to help you avoid unnecessary fees and taxes, allowing you to keep even more of the financial gains that you've made. Otherwise, you may find that you partially undo all of the hard work that both of you have achieved together.

Understanding Wealth Management Can Seem Difficult

But it doesn't have to be. With the above information to answer 'what is wealth management' in mind, you'll be well on your way toward making the decision that's best for you.

Want to learn more about how we can help? Feel free to get in touch with us today to see what we can do.