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Advisors Getting It Wrong on 'Wealth Management'?

Are advisors misusing the term "wealth management"?

A new report finds that advisors, investors and financial providers have been using the term inconsistently -- and perhaps incorrectly. “If advisors and providers are going to use the term, they need to know how their clients define the term,” saysGeorge Walper, president of Spectrem Group, the market research firm that produced the report.

"I agree that there is a real issue here," says Bob Seawright, chief investment and information officer for Madison Avenue Securities, a broker-dealer and investment advisory firm headquartered in San Diego. "In my view, ‘financial planning’ is broader than ‘wealth management,’ which is broader than ‘investment management.' … However one defines the terms, it is imperative that consumers understand what they are getting (and paying for), as well as what they are not getting (and thus still may need)."

More than 80% of investors defined wealth management as including investment planning, comprehensive financial planning, tax information and advice and investment management, according to Spectrem, which specializes in research on the affluent and retirement markets.

And most, say Walper, expect to pay a single fee for such a service package.


Walper highlighted one piece of news for advisors: Amid the aftermath of the financial crisis, "the perception of the term wealth management has improved," he says.

Among Spectrem's other findings:

  • The wealthiest investors, with more than $5 million to invest, were more likely than millionaires or mass affluent to feel positively about the term "wealth management"
  • Only 28% of the wealthiest investors disagreed with the statement, "Wealth Management makes me believe I am paying too much for the services."
  • 45% of investors say they obtain wealth management services from a financial planning firm or a brokerage firm; other investors say they get wealth management services from banks, mutual fund companies and accounting firms
  • Over the last five years, the percent of investors who believe a "comprehensive financial plan" is a key component of wealth management services has jumped 6 percentage points to 84%.
  • There's a gender divide: 70% of male investors are familiar with the term "wealth management'' while only 63% of females are familiar with it.

Spectrem says its research was fielded online in 2013 with a total of 1,022 investors. Spectrem also conducted focus groups and individual interviews with investors in New York, Denver and Tampa.
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