Wealth Management involves in depth knowledge and experience in a wide range of financial topics. A partial list would include income taxes, investment management, employee benefits, social security, insurance, estate planning and retirement plans.
Wealth Management is proactive in that Wealth Managers anticipate issues that might arise for their clients by thoroughly understanding all aspects of their client’s financial lives. It is also “user-friendly”, in that the Wealth Management team will coordinate the activities of other professional advisors such as attorneys and accountants. Wealth Managers will normally hold one or more of the most respected industry designations, such as the Certified Financial Planner, (CFP® ), Certified Public Accountant/Personal Financial Specialist, (CPA/PFS), Chartered Financial Consultant, (ChFC), or the Chartered Financial Analyst (CFA) designations. Many will have obtained a Masters degree, as well.
You’ll want any potential Wealth Manager to describe their client experience for you. Does every client get the same investment portfolio? Will they calculate their investment performance for you? Will they evaluate outside accounts such as your retirement plans at work? Will they provide education to you? Will they work with your other advisors? How often will you meet? Will you belong to one advisor at the firm or does the firm work as a team? What type of reports or communications can you expect? How much will their services cost? It is perfectly reasonable (and rational) to ask for referrals, but understand that confidentiality is a hallmark of wealth management and permission to share a client’s name must be obtained first. Most advisors are happy to share the names of local attorneys and CPAs that they have worked with in the past.
It is imperative that you understand how Wealth Managers are paid. All you have to do is ask for a copy of their form ADV Pt. 2. They are required by law to provide this disclosure document prior to, or at the time of beginning an engagement with you. This document will describe in full any and all sources of compensation, whether financial or otherwise that a Wealth Manager will receive. This could include commissions on the sale of investments or insurance, fees for specific services provided, “soft-dollars” from broker-dealers, sharing of fees for referrals to other professionals or a myriad of other sources of income. The most common compensation models are commission, fee-based, and fee-only. For a discussion of these terms and why fee-only is the superior model from the investors’ perspective, see Why Fee-Only Is Important.