Wealth management banking differs from traditional banking in that its main focus is to help investors grow and protect their finances across various fields, including investments and retirement, for increased overall prosperity.
It is also typically overseen by a wealth manager at an investment firm rather than a banker associate at a bank, which offers a more in-depth approach to managing your money.
The services offered also differ from traditional banking, which are generally limited to personal and business loans, auto financing, checking and savings, and credit card services.
Instead, wealth management banking focuses more on providing services that help build net worth, such as financial planning, investment advice and management, tax planning, retirement planning, and estate planning.
What is Net Worth?
Net worth is the total value of assets you have minus any debts.
Assets simply refer to any items you own that have financial value, such as stock, a car, a home, or any cash you have stored in a bank account. On the other hand, debt is any money you owe, such as a credit card bill, a home loan, a student loan, or a car loan.
Depending on your ratio of assets to debt, your net worth can be positive or negative. For instance, if the value of your assets exceeds your debts, then you are said to have a positive net worth. However, if you owe more than the total value of everything you own, it means you have a negative net worth.
A positive net worth is beneficial for many reasons, including it means you have money available to you in a financial emergency. It may also help make qualifying for a small business loan and more much easier.
Likewise, the higher your net worth, the more it provides even more opportunities for exclusive financial options afforded only to individuals with a high value of total assets over debts.
To calculate your net worth, simply add up the total value of your assets and then subtract the total amount of debt you owe from the sum to arrive at a positive or negative number.
How Wealth Management Banking Helps Build Net Worth
Helps You Set Financial Goals
Having specific objectives for your income helps you improve your economic situation, whether it is to become financially independent, save for your kid’s college tuition so they can attend school debt-free or more.
When you work with a wealth manager, they help make it easier to set your financial goals by first understanding your vision for your future and then breaking the larger picture down into smaller objectives, such as short-term goals and long-term goals, so it is more attainable.
Working with a financial professional also helps make you more accountable for sticking to your goals, so you are more likely to achieve success.
Helps You Choose and Manage Your Investments
If you are like many investors, you find investing intimidating because you don’t know when is the right time to jump into the market or what to buy to help safeguard your wealth against inflation and other economic downturns that can take a chunk out of your holdings. This is especially crucial if your assets are for retirement.
A wealth manager can use their industry expertise to help you pick the best financial instruments for your investment goals.
This may be high-yield equities that enable you to create another source of income, or perhaps you simply want to create a safe portfolio, in which case, they will help you purchase a collection of treasury bonds, CDs, and other low-risk investment products.
Or they may recommend a mixture of high-, medium-, or low-return investment instruments to help diversify your portfolio against market risks.
Helps With Estate Planning
Once you have worked hard to build your wealth, it may be your goal to ensure it remains in your family after you have passed on.
A wealth manager can also advise you on the best strategies to pass your wealth on to your heirs. For instance, they can help you set up a trust to help gift your loved ones with your valuables. This way, they avoid the high taxes and legal fees associated with other inheritance methods. Their inheritance can also be protected from creditors so that more goes to them.
It also enables you to maintain control over your assets right up until the very end for greater confidence.
A trust can also ensure your business stays in the family and that any charitable donations you want made from your estate are made and more.
Provides You Access to Various Experts in the Field
Wealth managers work with various professionals throughout various fields. Therefore, you also have access to some of the top experts in legal services, tax services, and more for the best outcomes.
Who Is Wealth Management Banking For?
Wealth management services are available to everyone. However, each firm has its own requirements for what minimum net worth amount or circumstances qualify for their services. Therefore, you must do your homework and seek referrals to find the best wealth management firm for you.
Wealth management also comes with its share of hefty fees, so depending on your net worth, it may not be worth it until you have amassed a certain amount of wealth, which traditional banking can help you do.
How Traditional Banking Can Be Used to Help Build Your Wealth
One way to use traditional banking to help build your net worth is to open a high-return savings account, such as a money market account, to start saving with a higher rate of interest that’ll help you amass more wealth sooner.
Traditional banks also offer many of the same investment instruments as wealth management firms, including treasury bonds, CDs, and savings bonds, but at a lower required investment amount, which you can also invest in to help grow your net worth.
Then, once you have reached your end goal, contact the wealth manager at your chosen firm to proceed with your overall financial plan.