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Wealth Manager Questions
Disclaimer: for educational use only, not to be used as any legal or financial advice.
This was compiled from many lists in dinarland, hopefully it is organized in a way that is helpful.
Firm’s Background and Ownership 3
WM Credentials / Education / Background 4
WM Compensation 5
Pricing and Fees 5
WM / Client relationship 6
Client Servicing and Reporting 7
Client Education and Research 8
Investing Philosophy 8
Security / Privacy 10
Additional resources to Investigate 11
Five Key Credentials to Seek in a Financial Adviser 11
“Oftentimes the most important questions clients should ask are not about their advisor, but about their own needs and goals” said Christine Leong Connors, head of Northern California, J.P. Morgan Private bank.
“My biggest piece of advice for selecting the right advisor is to find someone who listens more than they talk,” said Lynn Ballou, managing partner at Ballou Plum Wealth Advisors. “This may sound counterintuitive as you’re looking to this individual for advice, but you want someone who has a firm grasp on who you are and the goals you have.”
Financial advisers and planners attend seminars and classes and read books so they can learn how to win your business or, if you're already their client, to "deepen the relationship." The customary procedure is for the adviser to ask you questions, orally and in writing, and for you to reply. Then the adviser considers the facts and tells you what he or she thinks.
But when you decide it's time to hire (or replace) a financial adviser, it is a two-way street. Are you also prepared to be assertive? You should be.
Whether you're working with a financial planner on general big-picture matters or an investment manager who will actually handle your money, you are retaining these people and their organization to work for you.
This may cost you as much as 2% annually of your total assets that the adviser manages—probably more than you've had to pay an accountant or a lawyer. So there is no reason to be shy or to hold back in any introductory session.
Tell the planner or broker or investment manager—in a genial but matter-of-fact way—that you would like him or her to answer a series of your own questions in writing. If you run into resistance, or learn something troubling, take your business elsewhere.
This proactive, "educated consumer" approach doesn't play well with all planners. After I wrote a story in Kiplinger's Personal Finance chronicling one family's search for an adviser—a year-long process that included a thorough if somewhat cheeky questionnaire prepared by the investor—one planner wrote to me rather indignantly about my praise of this approach.
The planner said the questions should have been "How old are you?" and "What school did you attend," and then the more pertinent, "What are your other clients like?" The first two are irrelevant, as long as the adviser has recognized professional credentials and a clean record.
On the third point, yes, if all the other clients are older and richer, or younger and with less-complex affairs, that's a fair warning. You could end up as an afterthought to the adviser, the equivalent of being seated at the darkest table next to the kitchen, the last client to get a call returned.
So that questions should you ask? The AARP has a sample financial-adviser questionnaire, but it is overly weighted with bureaucratic matters such as "Are you a registered investment adviser?" (not all planners are, and anyway, it doesn't make one competent) and "Have you ever been disciplined by the Securities and Exchange Commission, the NASD, or other regulator?"
That's important to know, but you don't normally start by asking a professional if he or she is a crook. Perhaps there's a regulatory blemish, but with extenuating circumstances. Better to talk this subject out.
In all seriousness, many advisers are receptive to being interviewed. They have an incentive to get off on the right foot with you or any other prospective client.
So concentrate on the nitty-gritty: the cost, the investment performance, the type of investments the adviser favors or is most expert about, and the way the practice operates to serve you.
There's also the issue of whether the adviser is a fiduciary (which means your interests legally come first) or a broker, which puts the pro in the awkward position of trying to improve your finances while owing primary legal allegiance to an employer, who may have sales quotas and other rules designed, first and foremost, to boost its profits. These are the areas you want to explore in your interviews and questionnaires.
Firm’s Background and Ownership
When was the firm founded?
When did the firm begin providing wealth advisory services? What was the impetus behind the creation of the multi-family office business, if applicable?
What is the firm’s organizational structure? If family-owned, what is the percentage of the family’s interest?
What is the firm’s ownership structure? If family-owned, what is the percentage of the family’s interest?
Does the firm develop an annual strategic plan? If so, what are primary initiatives for the firm in the next two years?
What is the firm’s stated mission?
Is the firm a Registered under the 1940 Act of the Securities and Exchange Commission? Please provide a copy of the firm’s ADV Parts I & II filed annually with the SEC.
What is the derivative exposure for this bank and what are the future plans of the bank in relation to their exposure and associated risks
Does Your Bank Have A Wealth & Trust Division Separate From The Retail Side Of The Bank?
Investigate the firm’s background. Is there a history of past or current litigation against the firm? E&O Insurance? Review a copy of their Form ADV registered with the Securities and Exchange Commission and state securities authorities. How much of the net worth of the principals is managed at the firm?
Provide the number of employee hires and terminations/resignations for the past three years.
How many employees do you have in each major department? Provide a breakdown of employees in the following categories:
senior relationship managers
tax and accounting professionals
information technology professionals
WM Credentials / Education / Background
What’s your education? This isn’t polite party talk or an icebreaker. “Did the advisor obtain a college degree? Is the degree related to offering financial services?” says Keith Singer, owner and president of Singer Wealth Management in Boca Raton, Florida. “It's probably best to work with an advisor who is not only intelligent but educated as well.”
What are your credentials?
Are you a Registered Investment Advisor or a Registered Representative of a Broker-Dealer?
Are you a fiduciary? If you don’t know the term, a fiduciary is legally appointed and authorized to hold assets in trust for another person. “A fiduciary planner is required to put client needs ahead of his or her own, regardless of the situation,” says Bryan Hoover, vice president at Fragasso Financial Advisors in Pittsburgh. “Most importantly, this standard requires that all conflicts of interest be outlined in advance.”
What are your professional designations? Having the right credentials ensures a high level of competence. “I recommend hiring an advisor with a known and regulated professional designation, such as a certified financial planner or CFP,” Gordon says. “This is an excellent indication that the advisor has met specific standards in education, experience and ethics.”
Are you currently licensed to offer investment advice? Many consumers would assume a particular advisor is licensed to sell investments or give advice. “But that is not always the case,” Singer says. “Many financial advisors are only licensed to sell insurance products. Because these advisors are limited in what they can offer or discuss with clients, their advice may be limited as well.”
Can you tell me about your current relationship with your coach or mentor? For Lisa Margulies, branch manager and financial advisor with Regatta Capital Group in Los Angeles, this is “the opening question.” “I would listen carefully to the [answer] and gauge the financial advisor’s openness, honesty and vulnerability,” she says.
How do you invest in yourself? This isn’t about the money, but rather the ongoing education. “Ask them how they stay current in their training,” says Reno Frazzitta, president of Secure My Funds in Clinton, Michigan. “If they don’t have an answer, it may be time to look elsewhere."
Have there been complaints against the advisor? This is one potentially confrontational question you may want to check out on your own by going to the Financial Industry Regulatory Authority website. “Before making a final decision, check with FINRA.org for any complaints filed or penalties levied against the advisor,” says Greg McBride, senior vice president and chief financial analyst for Bankrate.com.
Why did you choose this work? Edelman says the answer usually falls into one of two categories. “They either talk about their fascination with investments, economics, financial planning and other numbers-oriented topics, or they talk about their fascination with people and how the dynamics of family relationships, emotions, attitudes and desires interact with effective financial decision-making.” Ideally, you’ll find someone who strikes a balance.
Two types of advisors. Fee based and *commissioned" based: a commissioned advisor who is paid by the company he uses to place your contract and trades. Then gets paid only on new invested funds as they are invested and only once except if the fund is sold or traded for another fund family if traded outside an annuity or life contract . You never pay the commissions. Vanguard Funds only deal in indexes, have the lowest fees and high returns for their investors.
How are you compensated? What do I pay for? What do I get?
How are you compensated? It’s not as clear-cut as you might think. “Many individuals are under the impression that financial advisors only make money if the investor makes money,” says Gregory Sichenzia, founder of Sichenzia Ross Friedman Ference, a securities law firm in New York. “This is not true. Many investment sponsors pay advisors handsomely just for putting them into a specific fund or product.”
How much do you cost? Don’t be shy about bringing up the money question early. “Compensation varies greatly,” Friedman says. “If fees aren’t clear or transparent to you, ask more questions. While no single model is right for everyone, it’s important to understand how your advisor is compensated.”
Pricing and Fees
There are all kinds of arrangements on how you pay an adviser. Fee-only financial planners charge by the hour, but they may also bill a percentage of your assets if you retain them to provide hands-on investment advice such as to design a portfolio of mutual funds. Others charge a combination of fees and commissions.
So it's key to ask the adviser to provide you a written breakdown of all fees and commissions, how they are figured, and which ones are fixed and which ones are variable. You can also ask how these charges compare to industry benchmarks. (One percent of total assets is fair; 1.5% is high although common; and more than that is too much.)
After all, many no-load mutual funds have low expenses, but if a planner charges you several thousand dollars to assemble a simple mix of index funds and then takes a cut of your balances when there's little or no management required, you're wasting your money.
Someone else might merely charge you $750 to take five hours to evaluate and reconfigure your investments and to update you every quarter. If you need additional advice, you can pay as you go.
Do you have a published fee schedule? If so, please provide. If not, please describe how you determine a fee for a new client.
Is there a minimum account size or minimum fee requirement?
How does the fee structure differ for different client types?
Do you offer any performance-based fees? As an alternative to basis points?
Do you accept soft dollars from any product providers? Soft dollars refers to money or other compensation from investment companies in exchange for the broker recommending their products.
Do you accept fees of any other type of service providers? If so, under what circumstances?
WM / Client relationship
How do you envision we work together to set investment objectives, monitor and adjust over time, and evaluate success?
Whose responsibility is it to keep connected? Avoid working with a financial advisor who sells you a product and then moves on. Ask about regular meetings, says Jeremy Shipp, president of Harbor Wealth Advisors in Richmond, Virginia. “Will they be quarterly or annually? And whose responsibility is it to schedule those meetings – the advisor or the client?
Who will I be dealing with? Who is actually managing my investments?
Tell me how you will interact with me and what I should expect in the way of services from your firm?
How many clients do you work with and what are you processes to ensure clear lines consistent and clear communication with me as a client?
Who is making the investment decisions? How customized is your approach?
What is the client to advisor ratio?
Does the advisor take custody of, or have access to, your assets?
What happens to my account if something happens to you? This is a fear for many clients, especially those who rely on phone calls to stay in touch. “It would be important to understand who the next point of contact is and how liquid your assets are,” Sichenzia says.
Can you give examples of your client commitment? The examples the advisor cites (or fails to cite) will provide valuable clues about motivation. “There are those advisors who work primarily to collect a paycheck, and there are those truly dedicated and passionate about what they do, committed long-term to their clients and careers,” says Penny W. Gordon, senior vice president, private wealth advisor with Gibraltar Private Bank & Trust in Coral Gables, Florida.
Mind if I bring a friend? This person does not need to have any connection to the advisor, only solid knowledge. “Ask if you may bring along your accountant, attorney or friend who’s knowledgeable about the investment world,” DeJong says.
How many family relationships does your wealth advisory business have? What is the distribution of clients by type (business owners, wealth owners, wealth inheritors, foundation, etc.)?
How many new clients have you added/lost in each of the past three years?
What percentage of your clients are full-service relationships? What services do you typically provide to the clients that don’t use your firm for all services?
What are current assets under management?
Please provide a breakdown of:
growth in new assets due to new client business over the past three years
growth in assets due to new assets from existing clients
loss of assets due to client attrition in the past three years
Provide references from three clients that have worked with your firm for at least three years?
What were the reasons why former clients terminated your services in the past three years?
How do you get new business? Do you have an active new business development effort? How is the typical relationship management team structured? And how is technical expertise provided to support the relationship team?
How are the relationship managers compensated? If they are paid incentive compensation, what is that based upon? Do they share in firm profits?
What is the typical account load for a relationship manager?
Please provide the biographies for senior management and key personnel who would service my account.
Please tell me why the last two clients that you lost left you? And the last one you let go?
Client Servicing and Reporting
How do you most frequently communicate with clients?
Do you have regularly scheduled client meetings? If so, what is the frequency and who typically represents the firm?
How do you interact with the clients’ other key advisors?
Do you provide electronic versions of client reports? Do clients have on-line access to their reports?
What kinds of summary statements are provided?
If I call suddenly with a tax or risk question, what response should I expect?
Client Education and Research
What kind of client education do you provide?
Do you offer formal seminars or other educational opportunities?
Do you publish research or newsletters for your clients benefit? Please include a list of research papers distributed to clients with the date of publication.
What is your approach?
How do you manage risk?
Please tell me your philosophy on investing and how to best gauge that we have sufficient resources to achieve our desired retirement lifestyle.
Do you own the same investment and insurance products you’ll recommend to me? There’s nothing like an advisor who puts her money where her mouth is. “If she doesn’t buy what she’s selling to you, are you sure you want to buy it?” says Ric Edelman, founder, chairman and CEO of Edelman Financial Services, a national firm.
Are you listening or pitching? You may want to be more diplomatic, but many financial advisors push the products of companies they represent, says Tom Halloran, president of Voya Financial Advisors. “Make sure the advisor listens to you and your needs and doesn’t talk or product-pitch at you."
This is a tough one because the timing of investments determines the performance. When an adviser makes claims—which they sometimes do on their Web sites or in brochures—that other or "typical" clients have earned, say, two percentage points a year more than the S&P 500 over a long period, you need to see objective evidence.
This result is plausible, but you might engage the adviser on the subject of this "track record" by saying, "I know you have experience and credentials, but can you show me how exactly you have delivered this sort of return?"
You'll at least get a sense of how the adviser expects to add value to your portfolio—at least enough to cover his or her fees. (Remember, you can always solicit advice at a low cost from Vanguard or Fidelity, as long as you're content to use their mutual funds for most of your investing.)
The adviser may respond by introducing the idea of risk-adjusted returns, explaining that an 8% long-term return with low volatility is better than 8% with considerable ups and downs.
Again, ask the adviser to tell you how he or she controls the risk and rebalances or rethinks the investment mix to keep you out of trouble. Many fee-only financial planners are conservative and prefer index funds.
Brokers with large national firms may suggest you use separately managed accounts run by outside investment advisers. This costs more but gets you active management, which could over time give you superior returns to the market indexes. If you don't want indexing, this is the time to say so.
What is your background, experience and track record?
Do you think your firm is a good fit for my situation and why?
How will you help me achieve my financial goals?
Are the recommendations I receive from you consistent with the recommendations I would receive from another advisor at your firm?
What are we (the clients) looking for and is this specifically what the advisor offers? Getting the fit right is the most important consideration.
How did you handle 2008? Questions about investing during the Great Recession aren’t common, but the answers could be very informative. “Were you in business then? Were you frightened? ‘No’ may be less than truthful,” says Gregory DeJong, financial advisor and market manager with Savant Capital Management in Naperville, Illinois. Also try to get a lead on whether the advisor stood firm or yielded to pressure. You might also ask: “With your clients who insisted that you do something, did you change their investments?” DeJong says.
Can you tell me about the last client you lost? Don’t you just love tough questions? “It can be a difficult thing to discuss, but it’s crucial for you to understand why someone else decided to end a relationship with the interviewee,” Hoover says. “Asking this question directly may give you a better sense of what the advisor values, and it should provide you with insight on the type of client he or she works with best.”
What’s the past performance of your model portfolio? This ideally should be examined on a quarter-by-quarter basis, says Robert Franklin Muller, executive vice president and head of distribution for Behringer, based in Dallas. “The bottom line is that smart, complex strategies implemented by experienced financial advisors cannot be simply substituted with an algorithm."
Is there a package to review of services/perks that are offered to your high wealth clients?
Will loans and lines of credit be provided
Concentrated stock management
Intergenerational wealth transfer strategies
No fees ever
No cashier's check fees
No bank fees
No credit card fees
No annual membership fees
Free use of a safety deposit box
Will you provide a written agreement outlining services and the fees?
How are my deposits protected against bank collapse, Government theft, bank theft?
Insure funds in accounts : Abbot Downing, Lloyds of London, Prudential
Check out Lodmell and Lodmell (lodmell.com) for possible asset protection
Life insurance for beneficiaries
Describe your expertise in each of the following service areas:
wealth transfer planning
foundation and philanthropic planning
tax planning and tax compliance
bill paying and cash flow management
client education process
What are your areas of greatest strength when providing wealth advisory services?
What new services/service enhancements are you planning to introduce in the next year?
What aspects of your business distinguish you from your competition?
Do you work with outside investment consultants to enhance your research?
Why should I hire you?
Security / Privacy
What are your privacy policies
How do you protect your client’s data (IT, Procedures, Policies)
Always ask for referrals, successful bankers do not mind providing this information.
Then check on those referrals and ask questions such as…is the banker available when needed,
Do they return calls in a timely manner,
What is your track record with them.
Do they follow your agenda or push their own?
Since you are going to become very close to these people….
You need to assure you have like personalities and are comfortable dealing with them.
For referrals: What do you like about your advisor? You may trust your buddy, but what if he’s vague? “Referrals are great, but ask, ask, ask,” says Pam Friedman, partner at Silicon Hills Wealth Management in Austin, Texas. “How often do they meet? What designation does the advisor have? Are they a certified financial planner?” If so, that requires passing a two-day exam and ongoing education.
Additional resources to Investigate
IAA (www.investmentadviser.org) is the Investment Adviser Association, whose members are wealth-management and advisory firms.
NAPFA (www.napfa.org) is the National Association of Personal Financial Advisors, a group of financial planners who charge fees but not commissions.
The FPA (www.fpanet.org) is the Financial Planning Association, lists financial planners
The NASD publishes a monthly list of enforcement actions against brokers and advisers
the Financial Industry Regulatory Authority (www.finra.org), the Securities and Exchange Commission, and state securities regulators—all have some version of a search engine through which, in theory, you can find out disciplinary background on any registered adviser.
Go to the SEC's files (www.adviserinfo.sec.gov) and look for the dossier on a certain adviser who, let's assume, is someone you've just met at a visit to a major firm such as Raymond James or Wachovia Securities. The SEC's site won't help much because the site is organized by firms, and the big firms are huge. Your best bet is the state securities agency
Legal Shield – www.legalshield.com
Five Key Credentials to Seek in a Financial Adviser
By Nellie S. Huang, From Kiplinger's Personal Finance, October 2013
Don't hire a financial adviser, unless he meets these standards.
1. A decade of the right experience. Focus on someone who has experience with clients who have assets and goals that are similar to yours, says Cindi Hill, a former financial planner in San Diego.
2. A clean record. Check the disciplinary record to make sure the adviser hasn’t had any run-ins with regulators or the law.
Advisers who manage more than $110 million in assets must file Form ADV, a Securities and Exchange Commission document that contains a treasure trove of details about an adviser’s business, including a firm’s disciplinary record (lower asset thresholds apply in New York and Wyoming). Search by firm name to find the Form ADV. Smaller firms are regulated by state authorities, but you can check on those firms at the same site. Brokers are regulated by the Financial Industry Regulatory Authority (Finra). Check their records here.
3. A transparent fee structure. Some money managers charge a fee for services—a flat fee, an hourly rate or a percentage of assets managed—and are called fee-only advisers. On the other end of the spectrum are commission-based brokers, who make money on the products you buy or sell. But these days, many brokers, such as John Burke, of Burke Financial Group, who is also a certified financial planner affiliated with Raymond James, forgo commissions and charge clients a fee for their services instead. And some fee-only or fee-based advisers may make commissions on some products they sell you. That’s why it pays to ask your adviser whenever he recommends a new product: Are you being compensated in any way if I buy it?
4. A CFP, CFA or CPA designation. There are more than 100 different financial adviser certifications and designations. But only three truly matter.
A Certified Financial Planner (CFP) has to complete 18 to 24 months of study, pass a rigorous ten-hour exam, and work for three years as a financial planner or do a two-year apprenticeship with a CFP professional before earning the designation.
A Chartered Financial Analyst (CFA) has to pass three six-hour exams and have four years of qualifying work experience to earn the title.
A Certified Public Accountant (CPA) knows his or her way around tax planning. Money managers will also have licenses that required them to pass tests.
5. Good references. After an interview, ask the adviser for at least two references from existing clients with profiles similar to yours—and call them! Also ask an adviser for retirement-income plans for current clients or samples of such plans. Are the plans logical, do they make sense, and do you understand them? If not, ask questions until you do. If you’re not satisfied, walk away.
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- GURU HUNTER
- Posts : 20038
Join date : 2012-04-10
I would not worry about a WM at this point, you're not going to suddenly come into a significant amount of money anytime soon.
Trust but Verify --- R Reagan
"Rejoice always, pray without ceasing, in everything give thanks; for this is the will of God in Christ Jesus for you."1 Thessalonians 5:14–18
- Super Moderator
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I usually do not agree with kevin but on this I really do agree.according to surveys most people do not have more then a half a mil even if it were to hit a dollar which I do not think it will after taxes what do you have left?do you think a real good wealth mgr will want to take you?
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