How to choose the right wealth manager for you
When choosing a wealth manager, you may want to interview at least three to determine who might work best for you.
“Start by figuring out what you want and pick a lane,” says Pam Krueger, the founder and CEO of Wealthramp Inc., a platform that matches clients with fee-only financial professionals. “Do you want advice and help planning, or are you just looking for portfolio management?”
Krueger recommends reviewing what matters to you and the type of relationship you want to have with a wealth manager and comparing your financial advisor choices based on your top priorities.
Understand how wealth managers and advisors are paid
When comparing the top wealth management companies, pay attention to how their advisors are paid. Kirk Chisholm, a wealth manager and the principal at Innovative Advisory Group, suggests starting with a fee-only fiduciary.
“A fiduciary must put your financial well-being first, even above theirs or their firm’s,” Chisholm says. “Find out if they’re a hybrid, which allows them to act as a fiduciary when giving you advice, but they might not meet that exact standard if they’re selling you products and earning a commission.”
There are three main ways that financial professionals are paid when helping manage your wealth:
- Fee-only: You pay the wealth manager directly through fees. These fees might be expressed as AUM, through a retainer or subscription, as flat fees for specific services, for transactions completed on your behalf or at an hourly rate.
- Commission: You don’t pay the advisor or manager directly. Instead, they earn a portion of the sale when you buy certain financial products and services, or when specific investment products are added to your portfolio.
- Fee-based: This is a hybrid of fee-only and commission structures. You might pay a fee for advice and management, but the advisor or wealth manager might also receive commission if they sell certain products and services.
Experts like Chisholm and Krueger suggest asking your wealth manager to sign a fiduciary agreement affirming that they will always act as a fiduciary when providing you with advice, managing your assets and recommending products and services.
Choose a fee structure that works for you
If you decide to use a fee-only advisor, review the fee structure to determine what is likely to work for you.
“Assets under management is the most common structure you’re likely to see when choosing a financial professional,” says Alissa Krasner Maizes, Esq., a registered investment adviser and the founder of financial planning firm Amplify My Wealth. For many high-net-worth individuals, AUM works well because they often receive the benefits of ongoing asset management and access to various planning services without the need to write a check or transfer money from their bank accounts.
Other fee structures include subscription, where wealth managers charge a monthly or quarterly subscription fee for advice and services; retainer, where clients pay an annual fee based on the services you receive; hourly; and flat-fee for a specific service.
“It’s really about your comfort level and what you’re getting out of the relationship,” Krasner Maizes says. “There’s no wrong fee structure. You just need to feel like you’re getting a good deal, whether you pay a one-time fee for a comprehensive plan, an hourly rate for the time your advisor spends working with you or you pay a monthly or quarterly retainer.”
AUM is the most common fee structure, according to industry analyst Envestnet. On average, you can expect to pay about 1.05% of assets under management when you work with wealth managers charging based on AUM. The next most common structure is a flat fee, with an average cost of $2,554. If your wealth manager uses a less common fee structure, such as an hourly rate or monthly subscription, you might pay an average of $268 an hour or $215 monthly.
Wealth advisor education and experience
There are no officially regulated or recognized titles or terms for financial professionals, other than registered investment adviser (RIA), which is defined either by the state or the Securities and Exchange Commission. Other than that, any financial professional can call themself whatever they want, whether it’s financial advisor, wealth manager, wealth advisor, financial planner or a myriad of other titles.
“Look for someone who has extra education or credentials that reflect your needs,” says George Mannes, with AARP. “For example, if someone calls themself a retirement advisor, I would hope that they have additional retirement education and some experience guiding people as they manage their wealth in retirement.”
There are some designations, established by various organizations and compiled by FINRA, that indicate a certain level of education in financial planning and investment management.
Some designations that might be relevant when comparing the best wealth management firms include:
- Certified financial planner (CFP): Often considered the gold standard in financial planning and wealth management, CFPs must gain experience hours, pass classes, take a comprehensive exam and receive continuing education. The CFP Board oversees this designation and requires CFPs to act as fiduciaries.
- Chartered financial analyst (CFA): The CFA Institute is responsible for course materials and work experience requirements. The CFA designation comes with a special emphasis on investment analysis and portfolio management.
- Certified private wealth advisor (CPWA): Advisors who meet the education requirements and experience requirements put forth by the Investments and Wealth Institute, and adhere to ongoing requirements, receive this designation, which indicates advanced knowledge of wealth management issues.
- Wealth management certified professional (WMCP): A designation earned through the American College of Financial Services, there are additional education requirements designed to teach a wealth manager how to handle specific wealth management issues.
- Chartered financial consultant (ChFC): The American College of Financial Services requires general financial planning education, plus additional courses in specialty areas. Ongoing education and adherence to ethics standards are also required.
Don’t forget to look at other financial professionals at the wealth management firm. In many cases, your primary wealth manager or advisor won’t handle all of your needs, Krasner Maizes says. She suggests that you should have a team of people with different specialties that can help you put together a comprehensive plan.
Review the types of professionals in the wealth management firm. For example, your primary wealth manager might be adept at providing planning advice and managing your portfolio, but not have extensive knowledge of tax planning. If the firm has certified public accountants (CPAs) or enrolled agents (EAs), your manager will likely work with them to ensure that you have the tax planning help you need.
Services offered by RIA firms
In general, the top wealth management firms offer a full suite of services designed to help you plan and manage all aspects of your finances.
“A good wealth management firm is holistic in nature,” Chisholm says. “You can get help with everything from financial planning to asset management in a way that helps you reach your overall goals. All the pieces work together.”
Some common services offered by wealth management companies include:
- Short-term and long-term financial planning
- Education planning
- Estate planning
- Tax planning
- Asset management
- Investment portfolio management
- Retirement planning
- Risk management, including insurance planning
Methodology
We analyzed some of the largest and most well-known independent RIA firms. We chose independent RIAs because they are required to act as true fiduciaries—meaning they must act in the client’s best interest—which is often a good starting point for those looking for a wealth manager.
Buy Side evaluated advisor credentials, portfolio construction, fees, customer support, available services and account minimums. These factors were weighted based on WSJ reader surveys regarding what they considered most important.
FAQ
What distinguishes a wealth management firm from a financial advisor?
A financial advisor is an individual, while a wealth management firm is a company that employs wealth managers and advisors. Additionally, wealth management implies that your advisor is taking on at least some of the responsibility for managing your investment portfolio and assets. While a financial advisor can also manage assets, they might only offer advice and planning help and not directly manage your portfolio on your behalf.
Are wealth management services only for the ultra-wealthy?
No, individuals without a high net worth can often access wealth management services. They might not be as comprehensive as the services provided to the ultra-wealthy, but some wealth management firms don’t require a minimum balance to access their services.
How do RIA firms charge for their services?
AUM is one of the most common ways for wealth management companies to charge. This is expressed as an annual percentage of the amount of the assets that they handle on your behalf. Other fee structures include a monthly, quarterly, or annual retainer, an hourly rate or a flat rate for specific services.
Can I switch wealth management firms if I’m unsatisfied?
Yes, you can change wealth management firms if you decide your current wealth advisor isn’t meeting your needs.
What should I look for in a wealth management firm?
Look for a wealth management firm that has credentialed advisors with the experience and education to help you reach your goals. Pay attention to how they’re paid and whether they act in a fiduciary capacity.
