What, Exactly, Is Wealth Management?

By Rita Cheng, CRPC®, CFP®
CEO, Blue Ocean Global Wealth

Although many people know that saving for their financial future is important, many don’t know what steps to take to accomplish their goals.

Following is a primer that I use to help my clients understand the playing field of financial planning. My hope is that it will make taking the first steps in the planning process easier for you, too.

Let’s get started.

1. What is financial planning? Financial planning is the process of meeting your life goals through the proper management of your financial resources. These may include purchasing a home, saving for college, or planning for retirement. It’s important to know that financial planning is a process, not a transaction. The goal is to adopt a big-picture, integrative approach to your personal finances.

2. Investment planning in isolation does not constitute financial planning. Financial planning is about controlling spending, managing credit, reducing taxes, increasing savings, protecting family and assets, and building wealth for the future. This process entails gathering financial information, establishing life goals, evaluating your current financial status, and developing a strategy to help you achieve your life goals.

3. Financial planning helps you understand the impact that each financial decision has on other areas of your financial life. For example, increasing contributions to your employer-sponsored retirement plan affects your cash flow, taxes, investment portfolio, and retirement plan. This integrated approach to managing your wealth provides clarity and confidence to your financial decisions. You can also adapt readily to life transitions and gain a sense of empowerment knowing that you are progressing towards your financial goals.

4. Wealth management is a comprehensive investment practice that encompasses financial planning, investment portfolio management, risk management, tax planning strategies, and estate-planning services to high-net worth individuals. There is no generally accepted standard for what products or services constitute wealth management. Wealth management is a holistic approach to understanding and providing solutions to the many financial concerns of a client’s financial life. Just as a primary care physician serves as a gatekeeper to coordinate the care given by varied organizations and collaborates with referral specialists, a wealth manager acts a relationship manager to better serve the client.

5. Finding a wealth manager is important. This person will be committed to identifying and understanding your financial challenges, and proactively identifying solutions. I encourage my clients to think of this in the same way that doctors and patients embrace the philosophy of integrative medicine, which is designed to treat the person, not just the disease. At its core, the success of integrative medicine depends on a collaborative partnership between the patient and the doctor, where the goal is to treat the mind, body, and spirit.

6. Collaboration with a financial team is also critical. As the financial lives of wealthy clients have become more complex, the notion of working with a team of professionals has become more important. Many of my clients value a streamlined integrative approach to managing their financial affairs, and I encourage my clients to build a group of experts who are each focused in a different area, including:

  • an investment advisor managing the assets
  • an attorney implementing the estate plan
  • an insurance agent recommending insurance
  • a CPA addressing taxes

Stay tuned for next month! In the September 2012 issue, we’ll describe three tips for choosing the best wealth manager for your business and family.

Marguerita M. Cheng, CFP® is the CEO of Blue Ocean Global Wealth, which provides corporations and institutions with portfolio construction, investment due diligence, and risk-management consulting services. The firm works with families, entrepreneurs, and executives to help them identify and achieve their financial goals. As a CFP Board Ambassador, she helps educate the public, policy makers, and media about the benefits of competent, ethical financial planning.

A Financial Planning Association (FPA) National Board Member and member of the finance committee, Cheng served eight years on the Board of Directors of her alma matter, The Robert H. Smith School of Business at University of Maryland, where she collaborated to increase alumni engagement and developed asset management education programs. She is also the President of the Blue Ocean Economic Empowerment Fund.

Cheng says her greatest joy and passion is touching the lives of others so that they may achieve their “personal financial success.”

For more information, visit www.blueoceanglobalwealth.com.

Securities offered through Private Client Services, LLC. Member FINRA | SIPC. Advisory products and services offered through Blue Ocean Global Wealth, a registered investment advisor. Private Client Services, LLC and Blue Ocean Global Wealth are not affiliated entities.

Blue Ocean Global Wealth intends that this article will be viewed for informational purposes only. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.