What Is Wealth Planning?

When you start building wealth, you might work with an advisor who helps you lay the foundation of a sound financial plan.

Over time, as you execute the plan and your wealth accrues, you might need additional support beyond just a financial plan. That’s when you may want to consider wealth planning, which typically adds additional services that help you efficiently manage some of the inherent complexities that come as your net worth grows.

Below, we explore wealth planning by defining the term and taking a look at the individual services that will usually fall under this umbrella.

WHAT IS WEALTH PLANNING AND WHAT DOES IT INCLUDE?

In general, you can expect wealth management firms to provide the following:

A financial plan: A wealth planner will sit down with you to understand your current financial situation as well as the goals that you are working toward. Then, he or she will build a financial plan, which is essentially a financial roadmap to help you reach your goals.

Insurance advice: A key piece of wealth planning is protecting what you already have, but also what you expect to accrue in the future. One way to minimize risk is to ensure that you have the appropriate levels and types of insurance, including life insurance and disability insurance. In addition, permanent life insurance accumulates cash value that has unique attributes, which can make it a key component of your financial plan both during your life and after.

Investment advice: A wealth planner can help you construct an investment portfolio that is appropriate for your financial goals and risk tolerance. Even experienced investors can benefit from the skills set of a wealth manager, because it’s difficult to remain objective when it’s your money involved. A good wealth manager will talk through the various investments that make up your portfolio and help you understand how each investment works with your other assets within your broader plan.  

Tax management: Taxes — whether in the form of income, capital gains, estate, or gift taxes — can eat away at your wealth over time. Therefore, virtually all wealth planning will involve some level of tax management.

Estate planning: Wealth planners will often work closely with other professionals, such as lawyers or tax attorneys, to ensure your legacy wishes are executed according to your plan. This will often involve coordinating key legal documents such as your will, living will, durable powers of attorney and trusts, which will dictate what happens to you and your estate if you ever find yourself in a position where you cannot speak for yourself.

Many people also experience a great sense of fulfillment making gifts while living so they can see the direct impact of their contribution. Managing your estate isn’t necessarily limited to end of life planning.

SHOULD YOU CONSIDER WEALTH PLANNING SERVICES?

If you find your financial picture growing more complicated and think that you would benefit from additional support outside of what financial planning can offer, working with a wealth planner or wealth manager can help you feel more confident that you’re on track to reach your life goals.