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Questions to ask a prospective wealth manager

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Picking the right professional to manage your finances can be a daunting task, with so many firms vying for your business. That’s why we’ve launched a mini-series on how to get the right advice.  

Last week, we looked at the differences between the two most common types of money expert: wealth managers and financial advisers. If you missed the article or want a refresh, you can find it here.

This week, we focus on wealth managers and specifically the questions you should ask a prospective candidate before you hire them.

James Johnsen, a director at Church House Investment Management, has been in the wealth management industry for more than 20 years. Here’s what he would want to know…

What is the size of the firm?

Wealth management companies range from small boutiques to large operations tied to major investment banks and asset management houses, so it is essential to have a good understanding of any organisation that could be handling your savings.

Useful areas to examine are when the organisation was established, who owns it and whether it is independent. Independent companies often have considerable ‘skin in the game’ – that is to say, they invest a considerable amount their own savings and that of their family’s in their own offering – so their investment objectives are often more aligned to that of your own.

What is the turnover of people in client relationship roles?

It is important to know the average tenure of key relationship managers. A high turnover could create issues around continuity of service levels.

By its nature, investing is about the long-term and supporting that with a consistent and constant point of contact works extremely well. It is also worth questioning whether your main point of contact will be a client relationship manager or an investment manager?  The former implies they are dedicated specialists whose sole focus is on managing your money.

What is your investment track record?

While past performance is not a guide to future returns, potential clients should ask a wealth manager for an assessment of their historical investment performance alongside, ideally, a hard copy of this track record for additional evidence. It can help to determine how they have performed through volatile conditions.

Also, it is crucial to ask if the data shows the performance net of fees – that will give you a more realistic idea of the returns you can expect. Many will use benchmarks as a way of determining if they are underperforming or outperforming, but others are likely to take a less binary approach, i.e. return over cash.

What are your fees and how will they affect my investment?

Finally, and arguably most importantly, find out exactly how much a wealth management business will charge you and why these charges have arisen. You are well within your rights to do this – under new European regulations, wealth managers are required to produce a full breakdown of the fees and costs new investors can expect.

An important area of focus is transaction costs. The extent to which investment managers buy and sell portfolio holdings will directly affect transaction fees, so high volume trading can act as a significant drag on performance.

Prospective investors are well advised to do some simple preparation ahead of an initial meeting with a wealth manager or financial adviser. Hopefully the suggested questions above will assist them in that exercise and ultimately help people to make more informed decisions about optimising their wealth.

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