6 Things to Consider When Engaging a Wealth Manager
While the roles of a financial advisor and wealth manager may share some commonalities, the reasons for seeking one over the other can be very dependent upon circumstances. Where a financial advisor can offer solutions for some portions of your wealth, a wealth manager understands total wealth. Put a little more succinctly, a wealth manager’s role is to take advantage of opportunities and mitigate risks to help you achieve your financial goals. The decision to engage a wealth manager is generally triggered by one of the following two events:
- Your accumulated wealth has outgrown the level of expertise of your current professional
- You experience an equity event, such as the sale of a property or business, or an inheritance
Understanding Your Goals
A true wealth management firm will be able to understand your goals and the financial concerns that can impact your success in reaching them. They can clearly inform on opportunities and threats, plus provide a roadmap for the future. Wealth managers can take on the leadership of your financial activities and advise on appropriate adjustments based on life changes and shifts in the financial environment. Communication is essential; a good wealth manager will always keep you informed.
Even if you are knowledgeable on financial matters, the focus of an experienced wealth manager can help you maximize your wealth’s potential. Certain amounts and types of wealth can also increase the value a wealth manager can provide, and owning assets like real estate, business interests, or stocks and bonds presents unique opportunities to tap into this expertise.
When selecting a wealth manager, consider the following six factors to help you find the right fit for your situation:
1. Scope of Expertise
Good wealth managers specialize in complex total wealth opportunities. It’s essential your wealth manager possesses a depth of expertise in an array of areas that impact wealth, as well as an understanding of risk. They will need to understand how to apply expertise based upon details specific to you: your profession, lifestyle, family, location, and assets. This scope of expertise extends to the relationships your wealth manager has, as well as their breadth of knowledge. They should be intimately familiar with your family, your transfer of wealth desires, risks in wealth protection, and liabilities related to your profession or lifestyle. It’s important your wealth manager understands all factors that impact your wealth and how to address them, including through the use of qualified third parties working in concert.
2. Team Structure
The most effective wealth managers work not independently but as part of a team. Their expertise extends beyond their own skillset, to the depth of knowledge possessed by their firm at large. Look for a wealth manager whose team includes multiple members, with different specializations and significant knowledge of each of the wealth influencer categories. The team should work together in a structured and complementary fashion to your benefit.
3. Willingness to Engage with Other Professionals
A good wealth management team will not only include internal partners but connections with experienced, outside third parties. These outside third parties may include tax professionals, estate planners, and insurance professionals. Such extended team members contribute to the overall value and help provide essential supplementary insights and services. They understand the goals and work together towards them. Most importantly, your wealth manager will be able to keep your team well-coordinated and focused on your financial goals.
4. Service Structure and Process
Make sure your wealth manager’s service structure and processes are focused on identifying family goals. Do they have a time-tested and successful approach to identifying the factors that may influence the success or failure of your goals? A good wealth manager will keep you well-informed and on track, and ensure you have your bases covered. Having an established process will help facilitate this success.
5. Fee Structure
There are a variety of fee structures that exist. What’s most important to you is to ensure the fee structure is fair and built in a way that avoids conflicts of interest for product sales. One way to identify if there is a conflict is if the fee you are paying for total wealth management services is based on a commission of a sale of a product. Such arrangements should lead you to question whether the advice to buy a product was in your best interest or offered to cover some portion of the wealth management fee.
6. Fiduciary
Generally, the wealth manager who is providing you with valuable, in-depth advice should act as your fiduciary. This means the advice they give is 100% in your best interest as the client – even if it’s to the detriment of the wealth management firm. At times, the advice a wealth manager has to give may cause the compensation of the manager to go down. A fiduciary is by law charged to do the right thing for the client regardless of the financial impact on the service provider. When your wealth manager acts as your fiduciary, it provides the peace of mind that both the management actions and the advice given will always be in your best interest.
Getting Started
There’s never a bad time to start a relationship with a wealth manager, even if your assets are “locked up” in illiquid assets like a business or property. For business owners, addressing your plans for your business should start well before any exit date. Your wealth manager can help you start setting goals, determine what financial concerns can influence the success or failure of those goals, and create a path to success. They may also start coordinating other professional relationships which will come into play.