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IMCA Defines ‘Wealth Management’

Based on a 2011-2012 study of “private wealth advisors” conducted by Kryterion Test Services, commissioned by the Investment Management Consultants Association,  the IMCA decided to define wealth management primarily in terms of the  client’s net worth: at least $5 million. Anyone with less wealth than that is a humble “financial planning” client.

The IMCA also defined wealth management in terms of the services that practitioners provide to deca-millionaires — services that require “specialized,” “advanced,” and “distinctive” knowledge and skills, including:

  • Human dynamics, such as ethics, applied behavioral finance, and family dynamics
  • Management strategies, including tax strategies and planning, portfolio management, risk management, and asset protection
  • Client specialization: executives, owners of closely held businesses, and retirement planning
  • Legacy planning, including charitable giving, estate planning, and wealth transfer

The IMCA stated that financial planners who serve mere millionaires and call themselves wealth managers “are using a label that is not an accurate description of the knowledge they have and services they provide.” Those who want to call themselves wealth managers should of course seek further training and certification through the IMCA.

See the IMCA white paper, “Defining Wealth Management: Serving High-Net-Worth Clients with a Distinct Body of Knowledge,” published in November 2012, available here.

Beware of Pretenders and Wannabes
The white paper, which summarizes the Kryterion study and the IMCA’s conclusions, states that the phrase wealth management “has been in use since the early 1990s to describe a comprehensive service model akin to financial planning, and more recently it has been applied to comprehensive investment advisory services for high-net-worth clients. The term has even been taken up be estate planning attorneys, accountants, and some insurance specialists.” Further, “As a result, there is no real consensus on the professional tasks, knowledge, and skills that should be associated with delivery of wealth management….”

The Kryterion survey and IMCA white paper resolved that consensus problem, not entirely in a self-serving way.

I invited the Financial Planning Association to comment on IMCA’s white paper, but FPA’s response was confusing; I asked for clarification, but they did not respond further.

© 2013 DailyDAC, LLC. Updated 9/24/13. Written by David M. Freedman, financial and legal journalist since 1978.