As with any service, you should ask a lot of questions before choosing a wealth management firm. This is an important decision, so to assist you in that process, we have listed 6 key factors you should consider when choosing a Wealth Management Firm. We hope you find this helpful.
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Ask your advisor if he/she is a fiduciary. Being a fiduciary means that the advisor is bound to act with your best interests in mind at all times. If the advisor is not a fiduciary, that means they are only held to a standard to do what is “suitable” for the client’s needs. In the investment business, this is a huge distinction. Merely doing what is suitable is considered a lower standard of care.
Registration with the Securities and Exchange Commission means that there is a level of oversight by a Federal agency. This means that there are specific compliance obligations of the firm which must be adhered to, which protect clients from bad actors. The SEC also does on-site examinations to ensure that investment firms are adhering to regulatory standards. This added layer of protection should give you comfort working with that advisor.
Many investors don’t realize that mutual funds and other investment products carry underlying fees that cover the expenses of running the fund. These fees are not always transparent and even though you don’t pay them directly out of pocket, these fees detract from your performance, which adds up over time. And these fees are IN ADDITION to the fee that your advisor is charging you. You have to determine whether the advice you are receiving is worth the double layer of fees being charged.
Many firms sell funds or other products from which they derive compensation. This creates a conflict of interest, and brings into question whether the investment is truly in the best interest of the client or if it is being used because the advisor has a financial benefit to using the product.
You should always meet face to face in the advisor’s office before choosing to work with them. You want to be able to assess whether they have a successful organization, with the appropriate staff and technology to support your needs. You also want to determine whether you have good chemistry and feel that you can trust the advisor to look out for your best interests.
As an advisor’s business grows, you should expect them to increase their staff, increase their use of technology and improve their processes. These things benefit the client by enabling the advisor to have better tools and capabilities to support the ever-growing needs of their clients.