Questions to ask a wealth manager

October 12, 2020

When finding a financial advisor or wealth manager, you are typically embarking on a long-term relationship. What questions do you ask a wealth manager to see if they are a good fit?

We recommend you look at investment performance and evaluate the big picture to know how well they will serve your needs. Consider interviewing potential advisors carefully to make sure you are comfortable with your chosen financial advisor. Some questions to ask a wealth manager, and why they matter, include:

Q: How are you compensated? 

Financial advisors may be compensated through third party commissions or client fees or a combination. While advisors can act ethically under any of these structures, a fee-only structure mitigates the conflict of interest that can arise when an advisor receives income by selling financial products to clients. “Fee-only” means the advisor is always paid through fees. “Fee-based” can mean the advisor is paid through a combination of fees and commissions for product placement.

Q: If you accept commissions, will you itemize them?

It is important that you know how much your advisor is paid when they recommend product to you so you can assess the value you are receiving and any conflicts of interest.

Q: Do you accept referral fees? 

An advisor may receive fees for referring you to another professional, such as an attorney, CPA, insurance agent, etc. Many advisors do not accept referral fees to avoid this conflict of interest.

Q: Are you always held to a fiduciary standard? 

Professionals who offer financial planning and investment products can be guided by two different standards of care. One is the fiduciary standard of care, where they must put your interests first at all times. The second standard is the best interests standard. While these two standards of care sound similar, they are not the same. The second standard requires that a financial professional work in your best interests when they are making a recommendation, but when it’s done, it’s done. If you are looking for an ongoing partnership with a financial professional, where your interests always come first, ask whether the professional is legally obligated to act as a fiduciary at all times in serving you.

Q: Do you provide comprehensive financial planning, and what is your process?

Some advisors focus on managing investments more than on offering comprehensive financial planning advice. That can be fine if it’s what you are looking for. Many advisors will indicate that they offer financial planning advice, but it may be more sporadic – in reaction to client questions, for example – rather than a systemic approach of guiding you in your financial planning. If you would like financial planning advice, look for a strong emphasis on comprehensive financial planning on the advisor’s website and in their materials. Ask about the process they use and the regular advice they will provide. You might ask: 1) Do you compile a list of my assets, including those not with you, annually? 2) Do you review my tax return annually for investment tax planning opportunities? 3) Do you review my work benefits annually to help me enhance my use of them?

Q: How will you help me reach my financial goals? 

Look for an advisor who really listens. Do they take notes and summarize what they’ve heard from you? Do you feel they understand what is important to you, asking the questions to find that out? Do they summarize your goals on paper so you can adjust their understanding? Advisors who focus on helping clients meet their goals are very good at first understanding what those goals are. Ask the advisor what goals their typical client has. Ask them how often they discuss client goals and what tools they use to counsel clients on achieving them.

Q: How many clients do you currently have? 

Some advisors serve 1,000 clients or more, while some serve 35 clients with more complex needs. Others may serve 300 clients but give most of their attention to the top 75. Financial planning is a partnership; make sure that any advisor you choose will have time to be a good partner for you.

Q: Do you have many clients like me?

The global financial world is complex, and advisors tend to specialize in certain client types or situations. Therefore, advisors are often most effective when they work with other clients like you.

Q: How are you licensed and have you ever been disciplined by the SEC or FINRA? 

Fee-only and fee-based advisors will generally have filed a Form ADV, intended as a public disclosure covering services, fee structure, firm history, investment management style and any misconduct. You can find these forms, including ours, at adviserinfo.sec.gov. If you don’t find information there for smaller advisory firms, you can consult nasaa.org/contact-your-regulator/ to determine how to contact the state regulator for disclosure documents.

Advisors who accept any type of commissions will generally need to be licensed through FINRA. For licensing and disciplinary history, check brokercheck.finra.org.

Confirm licensure status and disciplinary actions for those with a CFP (Certified Financial Planner) or CPA/PFS (CPA, Personal Financial Specialist) designation.

Q: What happens to my relationship with the firm if you leave the firm?

Does the advisor have an agreement with the firm that clients they serve will stay with the firm? If so, who will step in and serve you if that advisor leaves?

Questions are adapted from the National Association of Personal Financial Advisors and from the Financial Planning Association.

Download a copy of these questions to ask a wealth manager to have on hand as you make calls.

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