Successful businesspeople know the value of a good plan. In fact, their businesses almost certainly began with a well crafted and executed comprehensive plan. But when it comes to personal planning, even those most successful at accumulating wealth may not be as savvy about how to ensure that their own assets are at work to achieve personal and financial goals. Wealth management is crucial to maintaining, growing and appropriately allocating financial assets to their highest potential, says John Gulas, CEO of the Trust Division of Sky Bank NA.
Smart Business spoke with Gulas to learn how wealth management and its planning process can serve as a roadmap to meeting personal financial goals.
What is wealth management?
The definition of wealth management varies depending upon who is answering the question. But generally it applies to managing the finances of individuals who have high net wealth such as entrepreneurs, doctors, lawyers, accountants, corporate executives or individuals with generational wealth.
What is the wealth management process?
The process assesses and creates a plan to reach a series of present or future goals , such as investments, retirement, current income tax, capital gains tax, asset protection, cash flow and debt management,. It should also include looking into long-term care, health and life insurances, estate planning allocations for family members, and charitable contributions.
Why enter the process?
In this country, 50 percent of the wealth is held by owners of small and medium-sized businesses, who range in age from their middle 40s to their early 60s. Eventually, entrepreneurs, professionals and others with high net wealth are going to be making transitions. So they will be asking questions about where cash will flow to transition a business to a management team, or to start a new enterprise, or to change careers to some avocation that has become a passion. Wealth management creates a plan to grow and maintain financial assets to answer those questions.
What are considerations for creating a wealth management plan?
Goals are unique to each individual, but there are some general things to consider. First, the plan should be flexible because things will change over time.
Second, a person should consider their risk comfort level in allocating assets. A person who can’t tolerate any type of loss should make conservative asset allocations in terms of investments. When considering estate planning, people should take into account allocations and resulting tax implications for family members.
What is the best mix of allocations for growing and managing wealth?
That varies. The wealth management plan must fit the individual’s unique goals. Someone whose primary goal is to transition to a new career or new enterprise will be different from someone whose primary goal is to pass wealth on to the next generation.
Goals change and circumstances change. When most people plan for wealth management, the plan often becomes stagnant, because people will create the plan, then file it away and not review it again for five years or longer. The plan should be reviewed every year and every time the things driving the plan change.
What’s the role of wealth management service providers?
They are advisers. They look at the client’s current wealth and position, what the individual’s current needs are, future goals and the individual’s risk tolerance. They then go out to find the best possible solutions to meeting the client’s needs.
What are considerations when choosing a wealth management adviser?
Wealth management has to be a collaborative effort. The consultant must indicate that the plan needs to be all about the client as an individual, and that the client comes first. Ask questions about how the consultant is to be compensated, and make sure the answer is very clear. In some cases, the annual fees for wealth management services are low, but there are hidden costs such as separate costs for different services like estate planning or investment research.
Also, find out if the consultant is attached to an organization with a lot of proprietary products. How hard are they pushing those products? An organization with an “open architecture,” or a policy of reviewing several products to find the one that best serves the client’s needs, is a better option.
Beware of an adviser who claims never to have lost money for a client. Choose someone who will be honest about the downside of an investment or allocation.
Baby-boomers are unique because they will be the first generation in history likely never to retire. Wealth management is a tool for reaching personal financial goals. It’s an ongoing process of making decisions about your life.
JOHN GULAS is the chief executive officer of the Trust Division of Sky Bank NA. Reach him at (216) 206-1961 or [email protected]. Headquartered in Bowling Green, Ohio, Sky Bank serves communities in Ohio, Pennsylvania, Michigan, Indiana and West Virginia.