Many people know to spend extensive time and energy searching for the most capable and experienced doctors. The same effort should apply to finding the right wealth advisor, especially for individuals and families with significant wealth. It is very important that you or someone you trust do extensive due diligence. You may also want to get referrals from friends, family, colleagues, CPAs and attorneys.
Once you have your short list, consider asking each wealth management firm you are interested in the following questions:
- How will your wealth manager be held accountable?
Is the advisor a “fiduciary” — required by law to do what is in your best interest at all times? Because of the way they are structured and/or regulated, many brokers and other types of investment advisors are not held to the fiduciary standard. Be sure to find out if yours is. - How will your wealth manager tailor your portfolio to meet your personal goals and needs?
In an effort to cut costs, some firms may take a cookie-cutter process to portfolio management. Be sure the wealth management firm you choose is willing and able to customize your portfolio. One size does not fit all when it comes to managing wealth. - How will your wealth manager be compensated?
Some advisors collect sales fees to recommend certain financial products. It may appear that a broker/dealer is a better deal because the fees are hidden in transactions. But that does not mean the broker is making recommendations that are in your best interest, since they may not be obligated by law to do so (see question 1 above). - How will you know if your wealth plan is working as intended?
To ascertain if your investment portfolio and wealth plan are furthering your goals, you will want to meet or communicate with your wealth manager regularly. How often and how (in person, teleconference, etc.) is up to you. Choose a wealth manager committed to meeting with you at intervals that meet your needs and help you gain confidence in your plan. - Will your wealth management team have all encompassing expertise?
Ideally, you want to select a wealth management firm that can advise you on a variety of financial strategies, in addition to investment management. Services for high-net-worth clients typically include trust and estate planning, tax strategies, and legacy/philanthropic planning. - Is trust administration available?
If you have wealth to leave to others (family, a favorite charity, etc.) then selecting a wealth management firm deeply experienced with trusts is a good idea. - Is the wealth manager experienced in planning for multi-generational wealth?
Some wealth management firms focus strictly on investment management. Multi-generational wealth planning requires advisors who have the additional knowledge, skill and expertise in trust and estate planning. - Do the investment strategies factor in estate and income tax consequences?
Wealth managers should consider the big picture when making recommendations, including estate and tax consequences. You don’t want to be surprised later by a large tax bill that offsets any gains you may have made from investments. - What licenses, credentials or other accreditations do the staff have?
This all depends on your needs. Among the main accreditations you would want staff at your wealth management firm to have: Certified Public Accountant (CPA), Certified Financial Planner (CFP), Certified Financial Analyst (CFA), Chartered Financial Consultant (ChFC) and Juris Doctorate (JD). For trust management, you’ll want to see Certified Trust Financial Advisor (CTFA). - Did the wealth management firm ask questions and seem to be interested in you?
You want a wealth management firm that listens and then acts accordingly. This is your money and your risk. To provide the best service and outcomes possible, it is important that the firm you select asks you many questions — and follow-up questions — about what you value, your goals, risk tolerance, finances, family situation and your unique opportunities and challenges. Only then can they provide the strategies required to protect and grow your wealth in context of your needs and goals for decades to come.
