A Guide to Wealth Management in Canada
On average, people in Canada earn over $54,000 every year and this figure is going up every year! Your annual salary is vital for day-to-day living. It ensures that you can access food, shelter, and the comforts of daily life.
However, because of this, a lot of Canadians only think about their finances in the short term. In fact, less than a third of Canadians have a long-term financial plan. This lack of planning can have a huge impact on your financial stability both now and later in life.
Thankfully, wealth management in Canada can help you organize the money you have and plan for the future. So what exactly does a wealth management consultant do in Canada?
Read on to find out everything you need to know about private wealth management in Canada and what it could do for you!
What Is Wealth Management?
Wealth management is a type of financial advisory service. It takes a holistic approach to an individual’s financial situation.
This means that a wealth management consultant will look at all the areas of your finances. Based on this understanding, they will then make recommendations on ways for their clients to manage their finances.
However, this holistic approach goes above and beyond simple investment advice. Instead, it covers all financial areas including:
- Private wealth management
- Financial planning and management
- Asset management
- Portfolio management
- Retirement planning
- Investment opportunities
- Family office management
- Estate planning
- Insurance options
By approaching finances on an individual basis, wealth management companies can make recommendations to suit specific needs. For example, they can also advise on ways to use finances philanthropically or recommend banking services.
What Is Holistic Wealth Management?
This sort of unique tailoring allows wealth managers to focus on what will work best for your specific situation. It also means that they can meet a wider range of financial needs.
Wealth Management Business Structures
The style of wealth management that you use depends a lot on the company that you’re working with.
For example, wealth managers may work on a freelance basis within smaller companies. In that case, they may be hired as a financial consultant.
However, clients can also approach larger wealth management companies. If you hire a wealth manager you may end up working with one specific consultant. Or you may work with several individuals within a wealth management team.
Depending on your specific needs and wants, a wealth management consultant may enlist the help of other financial specialists. They will then make the most of what everyone in their team has to offer.
What is the Different Between a Wealth Manager and a Financial Advisor?
There are over 90,000 financial advisors currently working in Canada. Depending on who you speak to, you might hear this term used interchangeably with ‘wealth manager’.
However, the services that these two roles offer can differ greatly. The biggest difference between the two is their approach to your finances.
A financial advisor will focus on specific areas, such as investment advice. More often than not, they won’t take into account your overall financial situation. So they will recommend investments that are sound on the whole but might not suit you.
In comparison, wealth managers offer a much more comprehensive service. Their goal is to help you manage your money in an effective and empowering way. This might include, for example, helping you achieve certain financial goals, such as creating a college fund for your kids.
Coordinating all of these needs is a much bigger job. In fact, most wealth managers will take on the jobs offered by financial advisors and then offer more on top of this. So if you are looking for comprehensive support with managing your finances, this is the way to go!
How Do Robo Advisors Work?
In recent years, Robo advisors have become an increasingly popular source of financial support and advice. These are digital platforms that use automation and algorithms to help with financial planning.
This means that computers can use market trends and statistics to provide financial advice to their clients. This involves no supervision from human financial advisors or wealth management teams.
Often Robo advisors offer online surveys to help them provide more client-oriented advice. For example, they might ask about your income bracket and your financial goals.
Some of the best Robo advisors around at the moment offer a range of financial services including:
- Financial goal planning
- Portfolio and investment management
- Online security features
- Customer service
- Basic financial education and advice
So is it worth turning to an online platform instead of using a wealth management consultant?
Are Robo Advisors Worth It?
The best Robo advisors on the market offer a huge range of financial services. However, one of the most attractive things about them is their price point.
Compared to hiring a financial advisor or using wealth management firms they are much cheaper. But is this saving worth it? This depends on two things: the complexity of your financial situation and your budget.
Robo advisors are best-placed to deal with straightforward financial situations. Much like financial advisors, they’ll provide advice on basic transactions, such as investments. However, they aren’t equipped to handle more complex financial situations.
This is because they lack a human element, which is what makes them so cheap. As a result, they also can’t offer a holistic approach. This means that they won’t tailor their advice to suit you.
Obviously, your budget will be a big determining factor but it is also worth considering what you get for your money. A wealth manager might cost more but they also offer a lot more than a Robo advisor can.
If you’re looking for basic advice, a Robo advisor might be worth it. For anything beyond that, you’ll do better to look elsewhere.
How Does Wealth Management Compare to Investment Banking?
We’ve already mentioned investing several times. This is a valuable way for you to grow your financial assets. But why do you need a wealth manager’s help investing your money when you could invest it yourself?
First and foremost, understanding the investment market is no easy job. If you want to make sound investments, you’ll need to reach up and keep your eye on the markets.
Wealth managers and financial advisors also tend to foster relationships with investment companies. This means that they will have access to more investment opportunities than your average Canadian.
If you’re looking for financial advice, it is much better to go to a wealth management company instead of an investment banker.
Investment bankers are in charge of buying and selling shares but are essentially businessmen. This means they will not have your best interests at heart.
In comparison, a hired wealth manager has a responsibility to their client. So when they approach an investment banker about investing, they will represent your interests and needs.
Is It Worth Paying for Wealth Management?
Now you have a better idea of what a wealth management company does, it’s time to consider where it’s worth paying for these services. If you have a lot of financial assets and are looking to manage your money more effectively it absolutely is.
In comparison to other financial advisors, wealth management consultants offer you a lot more for your money. It’s worth thinking of this as an investment in your long-term financial stability.
As well as helping to manage your currents assets, a wealth management consultant will help you to:
- Plan for the future (such as retirement or college funds)
- Organize your debt (something that over 73% of Canadians are living with!)
- Make investments to grow your wealth
- Get out of any poor investments without losing too much money
Most wealth management companies also recognize people with larger financial portfolios will get more value from their services. Because of this, they often have a minimum income requirement for clients. If you don’t meet this, that is because the company doesn’t think their services would be financially beneficial for you!
To understand this better, let’s take a closer look at wealth management fees in Canada.
What’s the Difference Between Wealth Management Fees and Fee-Only Financial Advisors?
There are two keys ways that a financial advisor or wealth manager will bill you. These are fee-based and fee-only.
- Charge a fixed rate per hour, month, or year
- Have a fiduciary duty to prioritize the financial interests of their clients
Fee-based wealth management consultants:
- Receive a direct annual or monthly payment from clients
- May also receive a percentage commission on investments
- Must base any wealth-management transactions on their client’s specific interests and requirements
The percentage commission might sound like an additional cost. However, it also acts as an incentive for your wealth management consultant. This means that if they manage your money effectively, they may make a little more for themselves.
Whether fee-based or fee-only, your monthly or annual fees are often calculated depending on the size of your assets. This means that managing more financial assets will be more expensive.
How Much Does Wealth Management Cost in Canada?
The cost of wealth management in Canada varies depending on the size of your assets.
At the moment, the annual fee generally sits at around 1% of your asset value. So if you have assets worth $1 million, this will cost you $10,000 in wealth management fees. $250,000 worth of assets will cost $2,500 to manage.
However, most wealth management companies use a higher percentage for smaller portfolios. This ensures that they get a decent payment for their services each year.
If you start with a smaller portfolio, your percentage will decrease as your assets grow. This means it will actually become cheaper to use a wealth management company over time!
As we already mentioned, most companies have a minimum requirement for asset values. In general, wealth management firms will require a minimum of $100,000 in income and assets from their clients.
Tips for Finding Wealth Management in Canada
Do you think that wealth management might help you manage your financial assets better? Then you’ll need to check out these top tips on how to find a reputable wealth management company!
What Do Others Think?
A great reputation speaks for itself, so it is always worth finding out what others think of a wealth management investment company. As well as client reviews, it’s also worth seeing if a company has won any financial awards. These reflect how well a company compares to others in the same field!
You need a wealth manager who can take all areas of your financial situation into account. When you first meet one, it is worth asking what they consider when managing a client’s wealth. If they don’t provide a comprehensive list beyond investments, look elsewhere.
Speaking of investments, you want to work with a team that knows their stuff when investing. Your wealth manager needs to know when to play defensively with investments as well as when you buy shares!
An Experienced Team
Before hiring a wealth management consultant, it is worth looking at who they’ll be working with. Their team is a valuable resource. So you want a manager who is working with experienced, financial specialists.
Get Help Managing Your Finances Today
As you can see, when it comes to managing your finances, getting help from wealth management in Canada can make all the difference. A wealth manager will take all areas of your financial life into account in order to achieve your personal financial goals.
Want to know more about what wealth management could do for you? Then get in touch today to organize a no-obligation phone consultation. We’re happy to help!