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  • Writer's pictureBrendan Moody

7 Questions to Ask When Choosing a Wealth Management Firm

How to avoid the pitfalls of choosing the wrong wealth management firm


Watershed image of planning interviewing accounting firm


Choosing a wealth management firm is perhaps one of the most important financial decisions you will ever make. Getting it right will keep your mind at rest, knowing that your financial future is in good order.


Getting it wrong won't just cost you money you would have gained if you made a more informed choice, but it could also deplete your entire portfolio. Your financial future is tied into this decision, so it isn't one you can afford to get wrong (at all).


Below are some of the questions you should ask when choosing a wealth management firm, and the answers you must expect to hear before making your final decision.



1. Are they a fiduciary? 


pensive woman surrounded by question marks


All the questions on this list are valid, but if the answer to this one is no, then there's really no need to carry on the conversation. 


Why do you need a fiduciary? A fiduciary is obligated by law to operate in your best interests in 100% of their suggestions, advice, and general dealings with you. 


A fiduciary will reveal everything, conceal nothing, and prioritize your goals and optimized outcomes. You can rest assured that you won't be coerced into buying products like an annuity that benefit the person selling it more than it benefits you. If they recommend a certain investment vehicle, they'll also advise you on the associated charges. This upfront approach will almost certainly save significant costs in charges and fees.


This is the kind of relationship you want as far as your financial future is concerned. So, if the answer isn’t yes, that wealth management firm is not the right one for you.


2. What is their minimum asset requirement? 


Wealth management firms cater to all types of investors with diverse portfolios, but in most cases, they focus on investors with a similar range of funds or scope of investments. 


This often requires them to tailor their services to a unique niche of investors more than they do others. Bearing this in mind, you should not expect all wealth management firms to be able to cater to every kind of customer just because they are in the business of managing wealth. 


Millionaire? You wouldn’t want to find yourself signed to a firm where you are the only millionaire. This is because––regardless of the firm’s best intentions––it might not have the capacity and experience to effectively serve you. You should therefore be intentional about finding a firm that works with clients with the same scope and range as you. 


Asking to know a firm’s minimum requirement asset is a good way of knowing what scope and range of clients it has on its books.


3. What is their investment philosophy? 


Investments are vital to your overall financial health, and you should get some clarity from the wealth management firm on their approaches regarding this to be sure that your interests are perfectly aligned. A wealth management firm that's worth its dime should also be keen to make sure that their philosophy aligns with yours, as it will largely influence their recommendations to you. 


The most important thing here is a clear, concise, evidence-based approach that can be effectively stated. Remember that nothing hides incompetency and shadiness better than cumbersome professional gibberish. The firm must be able to properly express its investing philosophy, strategy, and beliefs, all based on verifiable evidence. 


If the firm can't do this, you might have a firm that makes financial decisions based on gut instinct rather than intellectual study on your hands (and that’s definitely one to avoid).


4. What investment benchmarks do they use to measure progress? 


Analyzing data on a computer screen


A good wealth management firm should have in-house, defined metrics that it uses to monitor how the investments of its clients are doing. If it does not have this, there should be a very good explanation that you’re convinced by and okay with. 


The idea is to make sure that it stays on top of all their investments, because it can’t always get it right, and staying a step ahead is the only way to take necessary action that ensures clients' safety.


Plus, achieving your long-term objectives requires that the steps being taken toward those goals are constantly checked to ensure that you’re on track. For example, a large-capitalization stock portfolio can be monitored against benchmarks like the Dow Jones Industrial Average (DJIA) or the S&P 500 Index (S&P 500), while technology stocks can be measured against the Nasdaq Composite Index


Generally, inflation is another important metric especially as far as long-term goals are concerned. Benchmarks keep the wealth management firm informed on the health of your assets, gearing it to take action if the assets aren't doing as well as projected.


5. How often will they review and update your financial plan? 


Because times change and industries adapt, all plans are bound to become obsolete after a few years. Unfortunately, many wealth management firms rarely revisit financial plans drawn up at the initial stage of wheeling the client in, and setting such plans up to fail. 


Periodic reviews are pivotal––they allow asset managers to regularly update your asset allocation and goals, account for important changes in your living situation, adjust for market movements, and rerun your long-term estimates. 


Some wealth management firms would respond that they do this review yearly, but too much occurs in the financial markets and in your life in a year for that to be enough. We recommend looking for quarterly reviews—or at least someone flexible enough to be on hand to communicate and navigate you through turbulent times as they arise.


6. How will they work with you? 


Understanding the structure of a wealth management firm’s client service approach is a good indicator of what you will get, meaning that if what you require isn't part of their day-to-day service model, that firm likely isn’t for you. 


There’s nothing quite like personalized, concierge-style service when it comes to managing your financial future, not some random phone specialist or recent graduate conducting low-level customer service. When you have a question, you want to speak with your assigned wealth manager, a person who is enthusiastic about you and your portfolio, familiar with you and your family, and will stick with you for the long term. 


Only such a service will adequately position the firm to understand your dreams and objectives to be able to help you achieve them.


7. What's unique about the firm, and why are they your best option? 


Some wealth management firms specialize in some market sectors but are poor in others, while others are extremely generalists and will be unable to provide some of the more sophisticated tax planning or estate planning services you may want. It's important to choose a firm that can fulfill not only your present goals, but more importantly, your future ones. 


You want a firm that handles traditional investment opportunities while also being flexible and experienced in fiduciary matters and capable of holding assets in trust, such as real estate, privately held corporations, or other asset classes. A full range of wealth management capabilities is always preferable as your financial picture grows and changes over time. 


Feel empowered to choose your wealth management firm?


Choosing a wealth management firm is almost on par with getting into a marriage––a relationship designed to last for a long time. 


Don’t forget to double-check their credentials and ask about their track record. Most importantly, let them make a case for themselves, telling you why exactly they’re different and the best fit for you. Booking a free introductory call with Watershed is a great place to start.

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Jan 12

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