As more consumers turn to comprehensive wealth managers for assistance in putting together a financial plan, it is becoming increasingly important to make sure the firm you have chosen is the right fit for you and your family.

Although quantitative information such as assets under management, number of employees, number of clients, average account size, etc, can be easily obtained through a search of the firm’s ADV filings, it is often the “intangibles” that will ultimately contribute to the success (or failure) of the relationship.

Here are 5 important factors to consider in selecting a wealth management firm:

Factor 1 Competence & Experience: 

Does the firm have the expertise to deal with the complex issues that your specific situation will present? Be wary of advisors who claim that they have dealt with thousands of clients “just like you!” The truth is, it is rarely the case that two clients are facing identical situations or concerns. It would be prudent to ask the advisor to talk about a few clients they have helped who have situations similar to yours, and some specific examples of the kind of help the advisor was able to provide.

Factor 2 Durability: 

Will the firm be able to continually deliver the service you and your family will need for the indefinite future? In other words, while you may be ready to retire within the next five years, you certainly do not wish to see your wealth manager do the same. You should look for a firm that has a succession plan in place to ensure its ability to continue serving its clients well into the future.

Factor 3 Resources: 

Can the firm provide access to different services, products, and best of class investment ideas? Although most Registered Investment Advisors operate on an “open-architecture” platform that allows them the flexibility to find investment opportunities from multiple providers, some firms may be limited in their access to institutional-quality investment vehicles due to the amount of assets they manage. Some firms may also have limited access to less liquid alternative investments (e.g. hedge funds, private REITs, limited partnerships, etc.) for similar reasons. Additionally, if your finances are fairly complex, you should also find out if the firm has the necessary expertise in house, or if it has an extensive network of other professionals such as attorneys, CPAs, or insurance specialists at its disposal. 

Factor 4 Performance: 

Has the firm delivered consistent results in both portfolio management and wealth management over an extended period of time? The firm that you choose to work with should have demonstrated consistent performance over an extended period of time. It should also be able to provide references that can attest to its ability to accomplish wealth management objectives such as estate tax reduction, wealth protection, and income generation. 

Factor 5 Compensation: 

Is the firm’s compensation structure aligned with your best interest? Are there any potential conflicts of interest? It is often said that compensation drives behavior. Therefore, it is critically important that you find out how the firm is compensated before you enter into an advisory relationship. Does the firm get paid a commission on products it recommends? Does the firm have fee-sharing arrangements with the professionals they steer you to? Although it does not automatically raise a red flag, you should ask plenty of questions regarding any compensation arrangements that can potentially jeopardize the firm’s independence and objectivity.

Most clients, and wealth management firms, benefit from long-term relationships as it may often take years for a well-coordinated plan to realize its full value. Therefore, an investor should ask plenty of tough, but fair questions before entering into an advisory agreement to ensure that you have the best chance at financial success.

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