6 Key Questions to Ask When Choosing a Wealth Management Company

This article is originally written by Timothy K. McCarthy, Forbes 

Selecting your wealth management firm can be one of the most important decisions you make. So how do you make sure that you are making the right choice? Here are 6 key questions you should address as you choose the right firm for you and/or as you assess the performance of your existing wealth manager.

1. What is their Business Model? 

Key factors, such as if they are privately or publicly held, the structure of their platform and their core business strategy, potentially influence how financial advisors manage your wealth. For example, publicly held companies face quarterly return pressures, which may affect the types and timing of the investments they present to you. A firm with proprietary investment vehicles, from which they earn fees, may have inherent conflicts of interest in the advice they offer.

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Also, many companies offer wealth management, but their primary business may be dedicated to other financial service areas such as banking and lending, or insurance. A company whose sole focus is wealth management, and whose business model is aligned to match the objectives of its clients, is likely to be a better steward of your wealth.

2. How do They Serve Their Clients?

How a wealth management firm serves its clients is another important consideration. Understanding the structure of their client service model is a likely precursor of what you will be receiving. If what you need isn’t part of their day-to-day service model, you shouldn’t expect to have your needs satisfied by that company. Will your advisor be there when you need them? Some key areas to explore when assessing the service model are the number of accounts per client advisor and the historical retention rates of their clients and advisors.

shallow focus photography of a woman in green top wearing white coat

A wealth manager that knows you well and will be with you for the long term will be better positioned to understand your goals and aspirations and better equipped to help you reach them. The client service model of a wealth management firm provides a good indication of the type of client relationship the firm intends to foster.

3. Are They Managing Your Investments or Managing Your Wealth?

There’s a huge difference between investment management and wealth management. Investment management focuses on asset allocation and return. It measures success by the performance of individual assets and the performance of a portfolio overall, whereas, wealth management is a more holistic approach. Wealth management accounts for asset allocation and return but is guided by a bottom-line balance sheet approach that also includes asset location, after-tax return, long-term wealth preservation and intergenerational wealth transfer. The goal of true wealth management is not merely what you make on a quarter-to-quarter basis, but rather what you keep over the long term.

4. What is Their Investment Approach?

A wealth management firm’s investment approach is another critical area to explore. Some fundamental questions to ask are:

  1. What are the investment offerings?
  2. Do they only offer internal/proprietary investment opportunities or is there access to outside managers?
  3. Is the investment approach customized to the client or model-based?
  4. Does the firm utilize mutual funds or individual securities?
  5. What is the firm’s historical investment performance

The answer to these questions will help you determine if they offer a wide enough range of investment opportunities and the cost of those opportunities. This means not only understanding the fee structure, but also recognizing the actual cost of the investments when taking into account management fees, capital gains, embedded fees within the investment, and other factors that impact your after-tax return.

5. What is the Breadth of Their Services? 

As your financial goal changes over time, it is important that you assess the breadth of services offered by your wealth manager. A firm that provides a full range of wealth management capabilities will be better able to meet your needs as your financial picture grows and changes over time. You want a firm that handles traditional investment opportunities but is also flexible and experienced in fiduciary matters and capable of holding assets in trust such as real estate, privately held companies, or other asset classes. Also, the trust situs (location of where your trust is domiciled) capabilities of your wealth manager are essential as you develop tax-efficient strategies for transferring your assets to the next generation. Not all companies will offer such a wide range of services, so it is important to select a firm that can meet your current and future needs.

6. Do They Get You? 

The final area by which to assess a wealth management firm is culture. Determining if a company is a cultural fit for you is more art than science. Some questions to ask include:

  1. Are your investment philosophies aligned?
  2. Do they understand your current portfolio and your vision for how to grow it?
  3. Have they taken the time to understand your business, personal goals, and aspirations?
  4. Are they as invested in seeing you meet those goals as you are?
  5. Are you getting what you want or submitting to what they have?

While these are not a simple yes or no questions, it can help you to assess if a wealth management firm is a proper cultural fit for you.

The Bottom Line 

The wealth management firm you work with will have a profound influence on the trajectory of your legacy. So, when it comes to selecting the right wealth management firm, one piece of advice endures — choose wisely!

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