Wealth Management Considerations

Wealth Management – From a non-wealth manager: Our take on using Wealth Management services providers. 

Wealth managers have two main purposes in life. The first is to preserve their client’s wealth and the second is to make it grow. Yes I know, wealth managers also want to earn a comfortable living as well. There is no cookie cutter approach to wealth management. The preservation and growth of wealth is uniquely performed based on the individual client’s wants, needs and desires.

There are many questions to be asked about Wealth Management Services if you are considering using their services. With online trading, stock brokers, banks, insurance companies and certified financial planners and advisers all providing investment advice, how do wealth management companies perform when compared to the others?

Let’s start with the stock market and how it has done. The news is full of comments about the Dow breaking the 20,000 market and how hot the market is right now. The operative term is “right now”. Other key indicators used by the stock market are the Nasdaq which is up 0.54%, the S&P – up 0.73%. Sounds pretty good doesn’t it. The problem with these indicators is they do not predict actual growth for the investor. Wealth managers are not one-trick ponies. For them to meet their client’s needs, wants and desires they need to increase their clients assets year over year not two months out of the year. If you looked at the Nasdaq’s ten key indices you would find that the actual range of improvement was only 0.27% to 1.48% despite the hysteria of breaking the 20,000 Dow. The AMEX Composite gained 0.99% and the Russell indices improved 0.76% to1.50%. I don’t know about you but I’m not really excited about a less than 1% improvement in my investments.

So how often have you been tempted to pull your money out of the stock market and put it in gold? I was on that train until I stopped listening to the pitches on TV and the email I received plugging buy gold now or be penniless the rest of my life. Well those who got on the gold train in January of 2012 over the five year period ending in February 2017 managed to lose 23.987% of their investment in gold. Does investing precious metals sound like a good deal to you now?

The above information makes the point that investing takes strategy, information, experience, and connections. All the hype you encounter on the internet is generally brought to you by brokers who never made a profit in their life investing any asset; sorry but that is the truth. 

So how do wealth managers stack up against their competitors?

The top 100 wealth management companies in the USA today have under management the whopping sum of $129,105,796,266 (yes that is $129 billion). The value of the assets under management is growing at a rapid rate. Out of the 100 top providers the following table shows the annualized rate of growth of assets under management:

         Percent Growth    No. of Companies

              100%+                      1

            50 to 59                      5

            40 to 49                      3

            30 to 39                      4

            20 to 29                     21

            10 to 19                     52

              1 to 9                      12

            Lost Assets                 3

The interpreted of the table says that 85% of the top 100 wealth management providers is the USA experienced a better than 10% annualized growth in assets managed. Growth in assets managed generally happens in three ways. Their client base expands, their existing clients give them more assets to manage, and/or the assets managed produced profits which were retained under management. For any or all of those possibilities to happen the clients would have to be satisfied with the performance of the asset managers.

An easy conclusion to draw is that Wealth Management providers are doing a very good job in preserving and increasing wealth for their clients when compared to the alternative investing strategies. 

As with any professional discipline Wealth Management Service companies must keep their strategic thinking caps on as we move forward with a new president and actions like the repeal of the Dodd-Frank Act. My bet is that Dodd-Frank will be repealed or neutered to the point that banks will be freed up to take a run at wealth management industry and they will be unfettered and unregulated. Banking’s ability to enter wealth management without fiduciary responsibility I think is going to be a problem. We all know the Wells Fargo phony bank account scheme who knows what they will come up with next. And, of course we will see the explosion

of less than qualified individuals entering the market place because they will no longer have to disclose conflict of interest in their dealings with clients. So, get ready for some rough and tumble marketing strategies that will impact the wealth management firm’s client base in negative terms.

How can wealth management companies counteract the negative implications that are sure to impact their profession from these less than professional interlopers?

Well I would emphasize the key skills that brought your company to the dance, preservation and growth of wealth. Point to your history of success by letting your clients know what you have accomplished for them. Second, I would expedite a review of my investment strategy. 

Thinking a little outside the box for a minute I might consider putting company funds into investment schemes that were short term, bullet proof and had significant returns. We have mentioned the “buy-sell” programs that last only a week to thirty days and sometimes shorter where returns are 10% to 30% net on the investment. High Yield Investment programs should also be considered where cash investments are traded in leveraged and non-leveraged programs that return a minimum range of 10% to 25% per week. The company investment fund can be used to insure that your clients do not drop below an established minimum return on the assets under management.

James Sheridan - Founding Member of National Capital Group, LLC

[email protected] San Diego, CA (619 337-1101)