What is wealth management, and what do professionals who call themselves wealth managers actually do? Those were the questions the Investment Management Consultants Association sought to answer when in commissioned a year-long study in 2011.
“The certifying bodies of a particular industry are usually the ones that define what that particular industry is or does,” Sean Walters, IMCA’s executive director and CEO, said at Schwab Impact 2012 in Chicago last week. “A pediatrician heals children, which is defined by the board of standards. It’s something the CFP Board has done for years with financial planning.”
One of the reasons for the study, Walters said, was “we found the term ‘wealth management’ was being used in a fast and loose manner. As an industry, we were not being very good about it.”
Kryterion Test Services, a professional certification test development and delivery company, initiated the three-phase job analysis on behalf of IMCA last year.
“We wondered if there would be a big overlap in how wealth management was defined when compared with the definition of financial planning from the FPA and CFP Board,” he added. “One of the biggest surprises to come from the survey was that there was not. It was a validation of the unique skills that our members offer their clients.”
He noted that the branding campaign undertaken by the CFP Board on National Public Radio says that financial planning is about "budgeting, insurance and retirement," yet none of those are unique to high-net-worth individuals and families.
“The line is drawn at $5 million in net worth. Fully 43% of respondents said that is the starting point. Estate planning was also a key ingredient. Also, being able to address the needs of executives and closely-held businesses were further differentiators. Special skills are needed.
“That’s how I boil it down; it’s truly multi-discipline,” he concluded.
Besides clarifying what constitutes a private wealth advisor, IMCA will use the analysis to refine the experience, education, examination and ethics requirements of its CPWA certification program.
Following are highlights of the study:
- Wealth management is a distinct practice. Financial planners, accountants, estate planning attorneys or investment professionals may practice advanced competency in this discipline.
- A client must have a minimum net worth of $5 million in order to be considered a high-net-worth client.
- The knowledge advisors need in order to provide competent wealth management incorporates 169 topics within human dynamics, wealth management strategies, client specialization and legacy planning.
- In working with clients, private wealth advisors may use fundamental tasks and a process similar to financial planning or other client-oriented professions; however, they need an advanced and unique set of knowledge and skills to serve high-net-worth clients effectively.
- The CPWA is the appropriate standard for advanced competency in the wealth management practice, and the certification will be adapted to more-effectively address the tasks, knowledge and skills addressed in the study.
IMCA has administered the CPWA certification since 2007.
Read also IMCA Study Defines Practice of Wealth Management at AdvisorOne.
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