Wealth Management

5 important questions to ask your wealth manager before choosing one

We have outlined the five essential questions you need to ask before you pick a wealth manager. We also share a few tips on things to watch out for, to enable you to make an informed decision on managing your investments and financial plan.

5 important questions to ask your wealth manager before choosing one

Whether you have a long-standing engagement with a wealth manager or you’re looking to find a new company to manage your assets; choosing the best wealth management service for your own needs is key. You need some reassurance that your advisor and their company are a safe pair of hands. What’s more, you need to protect your assets while getting the best possible return.

So, how do you measure their knowledge and expertise? And how can you really know if they have the integrity and the talent to manage your financial affairs for the greatest outcome?

Let’s talk about you.

You don’t need to be experienced in wealth management or understand the intricacies of the industry lingo to be able to filter out the good from the not-so-great when you pick a wealth manager.

  • Do you already have an established relationship with a UK wealth management service?
  • Have you saved up a substantial amount from your generous salary?
  • Were you lucky with a windfall?
  • Have you created your wealth with a successful start-up?

How you came to be in this position isn’t all that important. But you’re here, and you want to make sure you're getting the right advice. Regardless of your experience of managing your investments to date, here are five conversation-starting questions that will help you understand if a wealth management company measures up, or not.

Before sharing too much information about yourself or your assets, ask any potential wealth company, the following questions to find out if they are capable and compatible.

Question 1

Ask this: Can you paint a picture of your typical client for me?

Why: When you ask a wealth manager about their usual clientele, it gives you a clear indication of their areas of expertise. It will either instantly resonate with your circumstances, or not.

What to watch out for: You’re looking  for a wealth manager who can demonstrate they understand your unique set of circumstances. If you’re a young entrepreneur, and the wealth manager you’re speaking with traditionally deals with corporate executives, it might mean their real-life case experience don’t align with the areas that would be of interest to you.

In Summary: A wealth manager is very similar to a doctor, particularly the good ones. Usually, they have a specialism of looking after specific types of clients. This is why it’s essential to look beyond their list of qualifications and seek out relevant case experiences.

Question 2

Ask this: How does a financial product you recommend fit my financial plan and long-term strategy?

Why: Asking this question to any potential wealth manager is key if you want to uncover information about their ability to tailor their advice, and to understand how they communicate. Firstly, you want to make sure they can clearly explain the main considerations behind their recommendation. Secondly, you need to ensure this fits in with your long-term strategy. And finally, you want to make sure they can communicate with you in a way you understand.

What to watch out for: This is to make sure any advice is relevant to your own circumstances and goals. There is no one-size-fits-all approach where your wealth is concerned; your needs and plans are paramount.

For instance, if you’re in a position where your income covers your spending and savings, and your retirement age isn’t yet in sight, income-generating investment products are unlikely needed; They aren’t going to be tax efficient (outside a tax wrapper), and they are a trade off to your capital gain potential. This is why a highly personalised approach to your wealth is a must, and it needs to be non-negotiable.

In Summary: Investment products should be prescriptive. What’s right for one won’t always suit another. Where professional advice is being given, you need to be satisfied that you understand both the rationale and logic clearly, without exception.

Question 3

Ask this: How will you help me if my life or goals change considerably?

Why: This question will quickly confirm the agility of the wealth manager. It will give you a high-level overview of their extended professional network along with their ability to provide multidisciplinary support, which is essential for the modern-day world.

What to watch out for: You want to receive a comprehensive response to this question. It doesn’t matter whether the life change refers to marriage, divorce, starting a family, relocating internationally or changing companies. You need to hire a wealth manager who can demonstrate they’ve supported others through various shifts in their lives to achieve the best outcome.

In Summary: The way we live and the way we work has changed. Even company founders don’t tend to stay in the same job for 20 or 30 years like they used to. The dynamicity of life requires a flexible and resourceful wealth manager who is happy to accommodate the challenging and time-intensive workload that presents when these changes occur.

Question 4

Ask this: How do you invest your own money?

Why: You’d be surprised by how many wealth managers don't actually invest their own money. And although this isn’t a measure of whether they will be good at managing your assets; it’s always good to understand their investment style and risk preference.

What to watch out for: Some people like to know if their wealth manager shares a similar type of wealth personality. If they actively invest, ask these questions to get a feel for their natural style.

  • Are they conservative?
  • Do they take lots of risks?
  • Are they over-leveraged (too much debt)?

In Summary: A wealth manager knows the best way to woo you, usually with the highest degree of hospitality. However,  if they don’t invest themselves, they might not be able to give you succinct advice when you are about to make a questionable decision during challenging times. For the ones that do, it is possible that they can consciously counterbalance their natural style to advise you on what is suitable for you if their style differs from you. Ask the question, and their response should give you a better  indication of your compatibility.

Question 5

Ask this: Can you walk me through the complete fee list of your services, including any external fees, if any, in your investment proposal/my current portfolio?

Why: The cost of a wealth management service is a major factor, but it shouldn’t be the single biggest factor. Transparency is key.

What to watch out for:  There are some very well-known wealth management companies who demand a far higher than average entry and exit fee of 5%, this could and will eat most of your gross return. Instead, a more reasonable all-inclusive fee structure you should look for is 1-3% per year.

In Summary: MiFID II, a recent regulation, covers almost every asset type and related profession in the EU. Its purpose was to increase the transparency of costs across the industry, and has resulted in a mandatory disclosure. Here is a non-exhaustive list of the main categories of costs you should confirm.

  • Management fee (0.5-1.5% p.a.)
  • Advice fees (either one-off cost or an additional % of your assets)
  • Trading fees
  • Fund Manager fees
  • Custody fees (at a private bank, you can be charged app. 0.2% p.a. on assets held)
  • Value added tax (VAT)

In Summary

When you hire a wealth manager, they have a fiduciary duty to you as their client. You cannot underestimate the value of asking the right questions to make sure their capabilities and compatibilities are in-sync with your expectations. After all, you are looking for a long-term partner, and your process should uncover all the facts about their style and services before you make your choice.

Though many think these two are the same, investment management and wealth management are different. And when it comes to choosing a firm, this distinction is a crucial differentiating factor. In a future post, we cover the key differences and considerations between the two and explain why they each matter in their own right.

About Rosecut

Rosecut is a digital wealth manager that shows you your future net worth with one tap, and how to invest to get there. We use expert knowledge and artificial intelligence to truly understand you, and build a bespoke financial plan and investment strategy for you.

The company was founded by former Credit Suisse and Coutts advisor, together with a technologist, aiming to provide the best client experience enabled by private banking expertise and technology. We cater to people of rising wealth, who appreciate the value of impartial advice and discretionary management.

Please note

The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested. This may be partly the result of exchange rate fluctuations in investments which have an exposure to foreign currencies.

You should be aware that past performance is no guarantee of future performance.

If you enjoyed reading this, you might also like our other business insights here.