By: Lee Goggin, co-founder of findaWEALTHMANAGER.com
When it comes to finding the right wealth manager, the journey might feel quite daunting. After all, it is a significant decision entrusting your hard-earned cash with another individual, not to mention that the sector is notoriously discreet and you may not have heard of many of its best respected brands.
However, with rising inflation, debates around the future of interest rates, and increased taxation, there is no time like the present to get in touch with a wealth manager to explore the best options for your money. Below I look at the three top factors to consider when shopping around for the right wealth manager for you.
Dismiss the question, am I wealthy enough?
One of the first steps in finding the right manager, is gauging which firms offer assistance to your level of assets. The UK is a crowded and highly varied market, and it can take a lot of research to find the right firm for you. To add to this, recent regulatory pressures, as well as competitive pressures, have caused many wealth managers to review their business models and instead focus on areas where they can be more profitable. By raising the minimum wealth level for prospective clients, many have been turned away by wealth managers.
Yet many firms have gone in the other direction and have reduced their minimum asset thresholds; clients should never have to feel that they haven’t got enough money to approach a wealth manager. In fact, the question of ‘have I got enough money’ should be eradicated. There are services such as our own which will take out the stress of the selection process and find the right firm that matches your wealth needs.
Value is key
Once you have taken the first step and started compiling a list of shortlisted firms, the next most important consideration is costs. This is especially necessary if you have a list of firms which all offer broadly identical services in terms of investment offerings, individual attention from advisers, and any additional services such as financial planning advice.
In a nutshell, you want to keep costs as low as possible whilst ensuring you’re on track for the best possible performance for your profile. Some firms which offer really solid performers will only change 1.5% or even less for a significant portfolio, whilst providing an excellent personal service. If you’re receiving quotes for more than that, ask for the firm to justify their high fees with performance data. A small increase in fees can add up to massive one when compounded over the years.
If you remember nothing else, ask for the firm’s Total Expense Ratio (TER), which is the total cost of running your portfolio, including all charges and costs. This will provide you with a clear picture of the final costs and how much of an impact the fees will have on your final investment returns.
Some clients are happy to pay a small premium for a premier service or for superior returns, but this should always be a conscious choice. If the wealth manager is charging a TER in excess of about 2%, then do not be shy about asking them to justify that fee with performance figures going back a number of years. Be specific that the figures should be for a risk profile which is similar to yours.
You will always get what you pay for in wealth management, as with everything else in life. But you must insist that you really do get the investment returns and service standards which warrant the price. If the potential provider isn’t being transparent with the value of their offering, it’s time to look elsewhere.
In it for the long-haul
A consideration that is often forgotten is the emotional aspect of finding a wealth manager. Your prospective wealth manager is one which you hope will be with you in the long haul to help you plan for the major financial commitments that comes your way in life.
One way to gauge your potential relationship with the wealth manager is asking for their own history, such as how long they have worked at the firm, whether they have dealt with clients who have similar needs to your own, and, importantly, what the process is if they were to leave the firm.
Alongside assessing the longevity of the potential relationship, the perfect wealth manager must also be aware of your financial personality. They should take the time and effort to get to know you as an individual during the assessment, and to understand your risk capacity and tolerance, as well as your reactions to market-moving events.
A wealth manager could create the perfect investment strategy in theory, but unless they take in your financial personality, the strategy is made almost redundant as the investor will lack faith in the plan due to it not matching their own. This personalised service is why, after all, we use human advisors as opposed to robo-advisers. The perfect wealth manager should be there to not only manage your investment, but also manage you as an investor throughout your wealth journey.