Essential Questions You Should Ask Your Wealth Manager

Each individual has unique financial requirements and different attitudes toward money. This warrants a different approach to wealth management, which is also why different financial advisors work on various strategies and formulate different plans to grow their client’s wealth.

Wealth managers are essential players in the investment landscape. In addition to years of financial experience and knowledge, wealth managers are trained experts on money matters, interact within their industries, and stay up to date on financial developments and new investment products in the market.  A good wealth manager can provide you with an outside perspective on your financial situation, which often could be invaluable. You want to find someone who can act as a sounding board for you during significant life and financial events, and help you make the right decisions. So, if you wish to have a personalized strategy drawn up for you that covers investment advice, estate planning, accounting, retirement, and tax services after considering your wealth, reach out to a wealth manager who can do the same for you.

You need to ensure that the wealth manager of your choice is credible enough to do the job for you, will give you the best-unbiased advice, and is someone with whom you can communicate easily. So, making sure you ask your wealth manager the right questions to not only ensure you have engaged the right financial advisor to fill this critical role in your life, but also to ensure that your manager’s strategy for money growth is working for you.

An honest, meaningful relationship with a wealth manager requires thoughtfulness, good judgment, and experience to guide you through your financial journey. To double-check that the wealth manager you have chosen is the right fit for you, there is a range of questions you may ask wealth managers before inking the deal. In this article, we tell you about the most important questions you need to raise with a potential wealth manager. But first, let’s understand the scope of work of a wealth manager.

Table of Contents

What is a wealth manager?

A wealth manager is an advisor who manages the finances and money matters of their clients. While there are some similarities between wealth managers and financial advisors, there are also significant differences.

Wealth managers typically work with high-net-worth individuals to help them build or maintain their wealth. They also provide clients with a comprehensive suite of services that cover many aspects of a person’s financial life, in addition to investment advice. As opposed to traditional financial planners, wealth managers generally take a more hands-on approach to money management.

Long-term wealth stewardship and sound financial advice are not commodities. Knowing what questions to ask your wealth manager is one of the first steps in selecting the right manager for your wealth—and having the right answers to see if they meet your financial objectives. If you choose wisely, your wealth management firm can guide your financial strategy as you build, preserve, and eventually pass on your wealth.

But, finding the right fit is not always easy. Before hiring a wealth manager, ask some key questions to learn more about the professional’s background, experience, practices, and dedication to customer service.

There is a lot at stake when you’re interviewing a wealth advisor to guide your wealth decisions and help you achieve financial security.

Now that you know about wealth managers let’s move on to some questions you need to seek answers to from potential wealth managers before you decide to engage with them.

What questions should you ask a wealth manager?

1. What is the wealth manager’s business model?

The first thing you should know about a wealth management firm is its business model. Key factors such as whether they are privately or publicly traded, the structure of their platform, and their core business strategy may all impact how they manage your wealth. For example, publicly traded companies are subject to quarterly return pressures, which may influence the types and timing of investments they present to you. A firm with proprietary investment vehicles through which it earns fees may have inherent conflicts of interest in the advice it provides. Furthermore, while many firms provide wealth management services, their primary focus may be on other financial services such as banking and lending or insurance. A firm whose sole focus is a wealth management and whose business model is aligned with its clients’ objectives is likely to be a better steward of your wealth.

2. Does the wealth manager understand the difference between managing your investments and managing your wealth?

There is a big difference between investment management and wealth management. The primary goals of investment management are asset allocation and return. It measures success based on the performance of individual assets as well as the overall performance of a portfolio. In contrast, wealth management takes a more holistic approach. It is guided by a bottom-line balance sheet approach that also takes asset location, after-tax return, long-term wealth preservation, and intergenerational wealth transfer into account.

Actual wealth management is concerned with what you keep over time rather than what you make every quarter.

3. What approach does the wealth manager take in investing?

Another essential aspect to investigate is a wealth management firm’s investment strategy. The following are some basic questions to consider:

  1. What are the investment options?
  2. Is there access to outside managers, or do they solely offer internal/proprietary investing opportunities?
  3. Is the investing strategy tailored to the client, or is it based on a model?
  4. Is the company investing in mutual funds or individual securities?
  5. What has been the firm’s investment performance in the past?

Answers to all these questions will help you determine whether they provide a diverse enough range of investment opportunities and also the costs associated with those opportunities like understanding the fee structure, recognizing the actual cost of the investments along with management fees, capital gains, embedded fees within the investment, and other factors affecting your after-tax return.

4. What education and training qualifications does the wealth manager hold?

The qualifications of a wealth manager are the most important aspect of your wealth management. Having an untrained wealth manager can damage your capital acutely. Many companies offer specialized training programs, classes, or degree programs to prepare their wealth manager. Most wealth advisors hold one of the following credentials – Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), and Personal Financial Specialist (PFS).

5. Has the wealth manager earned any relevant professional credentials?

Private wealth advisors can obtain a plethora of professional designations. To determine how substantive each program is, inquire about the breadth of the curriculum, the hours of preparation required, and the pass rates.

6. What techniques and methods does the wealth manager use to stay updated on industry trends, laws, and innovations?

Consider how your advisor stays on current industry trends, laws, and innovations and whether their response reflects their dedication to staying in a fast-paced profession and industry. Professional organizations may be a good source of ongoing information for your advisor.

7. What unique skills does the wealth manager hold? (e.g., investment management, financial planning, behavioral coaching, financial concierge, family dynamics counseling)? How does the wealth manager collaborate with outside advisors for areas outside their core competence?

It is improbable that a single practitioner can be knowledgeable about every facet of wealth management. Consider how your advisor handles aspects of wealth management outside of their core competence, as well as how they might collaborate with any other advisors you already have worked with.

8. Why has the wealth manager chosen to work at the firm they are currently at?

Be aware of how your relationship creates revenue for your advisor, including any revenue that may be generated in addition to the advisory fee you may pay. This could include bonuses from the advisor’s company, referral fees, commissions, or other payments from product providers, among other things.

9. In what capacity has the wealth manager worked with high-net-worth individuals and for how long?

Working with high-net-worth investors is often rewarding for private wealth advisors. It exposes a wealth manager to various other nuances of wealth management thus can be rewarding to other investors.

10. What is the wealth manager’s financial planning strategy?

Some advisors will make a financial plan with you. In contrast, others will have specialized resources in their firm to address your financial planning needs. Depending on your circumstances, you may prefer that your advisor participates in developing a financial plan. Determine what, if any, fees are charged for such financial planning.

11. How does the wealth manager’s fee structure fit along with your financial objectives? 

Many advisors collect a fee based on the market value of assets handled on your behalf, which corresponds with agreed-upon risk parameters. Discuss with your wealth manager how such fee arrangements might affect their counsel, resulting in a decrease in assets under management, as well as how asset growth might affect the marginal cost of their advising services.

12. Does the wealth manager have alternative fee arrangements available for clients?

Some advisors claim to offer various fee structures, such as flat fees, a retainer fee, and hourly charges, or some combination of assets under management and other fees. It is paramount that you clearly understand the fee structure asked out of you.

13. What additional fees might you incur for the wealth managers’ services?

To fully comprehend the cost of guidance and make your advisor’s costs easily comparable to others, try and find out if any additional fees that may apply, such as fees for financial planning, financial concierge services, custody, or other expenses.

14. Who has physical custody of your assets while they are under the wealth manager’s care? Can you transfer your assets if you ended your relationship, or would you have to liquidate them?

The best practice is for your assets to be kept separate from your advisors and a third party to regularly report on their status. This may prevent your advisor from deceiving you about the condition of your account by issuing false account statements. You should be able to transfer assets-in-kind to a new advisor rather than having to liquidate to cash (which comes with transaction charges and may have tax ramifications).

15. How is your digital data safeguarded? Has the wealth manager ever faced any data breaches in the recent five years? And, if yes, how did those issues get resolved?

Your advisor should place a high premium on data security and be able to outline the policies and protocols in place to prevent data breaches.

16. How often and in what ways does the wealth manager interact with his clientele who are comparable to you?

Consider the complexity of your needs, the stage of your connection with the advisor (early in the relationship, more involvement may be required to address fundamental planning difficulties), as well as your schedule and degree of comfort.

17. How would you get updates about your relationship with the wealth manager on an ongoing basis? Would you have digital access to information about your relationship at your convenience?

Consider whether you desire regular updates or more ad hoc communication when markets fluctuate, or other problems develop. Determine whether you are satisfied with the level of access to your account information, including the possibility of digital access between normal reporting periods and the capacity to link your account information into other systems.

18. What kind of routine reports would you get from your wealth manager, and how often would you get them? Who is in charge of preparing the reports? Is it possible to customize the reports to fit your needs?

 It is doubtful that you’ll be able to anticipate all of the reporting you’ll need or want at the start of your partnership. With time, it should get easier to customize reports per your needs and specifications.

19. How would the wealth manager incorporate tax planning strategies to suit your needs? Is there a tax expert on your team?

Most clients will require specialized tax advice, which must be incorporated into financial and investment strategies. If you have a working relationship with a tax advisor, make sure you know how your counsel may communicate with them directly or on your behalf.

20. Can the wealth manager describe any potential conflicts of interest between us and how would you address or manage them? Would the wealth manager attest that he is operating in your best interests as a fiduciary at all times?

While some business models prohibit an advisor from acting as a fiduciary on your behalf, you should consider how conflicts of interest are addressed and minimized. Working with a fiduciary 100% of the time would go a long way towards securing your financial future as well as building trust between you and the advisor knowing that he is working in your best interests at all times.

21. Have the wealth manager ever faced allegations of misbehavior or disciplinary action from a regulatory body?

Although regulatory bodies may provide information regarding disciplinary actions, advisors should also discuss claims with you that did not result in disciplinary action.

And here is a bonus question to ask yourself:

Does your wealth manager understand you?

The last criterion for evaluating a wealth management organization is its culture. The following are some questions to consider:

  1. Are you both on the same page when it comes to investing?
  2. Do they have a good understanding of your present portfolio and your plans for expanding it?
  3. Have they taken the effort to learn about you, as well as your aims and ambitions?

To conclude

While there are many wealth managers to choose from, finding the perfect one can be difficult. It is critical to interview an advisor you’re considering, just like you would with a job prospect. Ensure that you understand how the advisor is compensated and whether he has the qualifications and experience necessary to develop a tailored plan for your specific financial goals and circumstances.

If you wish to get in touch with a wealth manager who can take a stock of your finances and help you preserve and boost your wealth, use Paladin Registry’s free advisor match tool and get matched with experienced and certified financial advisors who may be able to guide you effectively as per your unique financial requirements. Answer a few simple questions about yourself, and the free match tool will connect you to 1-3 advisors suited to meet your financial needs and goals

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