Everything to Know About Wealth Management

When determining how much help you need in creating a financial plan, it’s beneficial to know the difference between a financial advisor, investment manager and a wealth manager and what types of services they provide. While some may use these terms interchangeably, in reality, they offer very different types of services. The financial professional you choose will depend on the complexity of your financial situation.

Wealth managers take into account:

The bottom line is that you can count on your wealth manager to be your proactive financial advocate, no matter what.

Financial advisors often outsource that work without being fully transparent about it to the client. Your financial advisor may not be the advocate you thought they were if all the different pieces of your financial plan aren’t working in tandem.

Signs You Need a Wealth Manager 

• You have a large estate and need a plan to reduce your estate tax burden
• You own a business or have equity compensation and need advice on maximizing wealth with tax-efficient strategies 
• You’re a high-income earner in a top tax bracket
• You’ve gained sudden wealth or are facing a major life transition, such as an inheritance or divorce settlement
• You appreciate the ability to delegate changes to a proactive financial professional
• Your finances have reached a point where it no longer makes sense to self-manage, opening you up to risk or missed opportunities
• You’ve outgrown basic financial advice
• You’re tired of having to ask your advisor to think about what comes next

Signs You Need a Financial Advisor 

• You’re a high earner in a top tax bracket
• You’re not good at budgeting
• You’ve stalled on making a financial plan because of decision fatigue and have a specific question
• You and your partner are not on the same page when it comes to finances
• You need to start planning for significant life events
• You don’t want to learn about finances

Signs You Need an Investment Manager

• You want to invest more but aren’t sure where to put your money
• You need advice managing your stock portfolio
• You need help determining your risk and returns
• All your savings is in cash

What is a Fiduciary?

A fiduciary has a legal responsibility to make financial decisions in a client’s best interest, even if it may not be what is most financially valuable for the firm. They are charged with developing financial plans and investment strategies that align with a client’s personal goals. 

A fiduciary may earn compensation by charging clients a flat fee for service or a fee based on a percentage of the client’s assets under their management. There are no outside incentives or kickbacks to influence their judgment.

Non-fiduciary financial advisors or wealth managers can earn income from other sources, like commissions on product sales, and are held to weaker industry standards. 

Simply put, non-fiduciaries will offer advice or strategies that meet your needs, but they aren’t necessarily the best options available.

Dually Registered Advisors: What to Look For 

Here is where things get tricky: Someone may claim they follow the fiduciary standard when they are actually dually registered. When firms are registered as both fiduciaries and brokers, the lines start to blur. An advisor or manager may act as a fiduciary when conceiving your financial strategy and then act as a broker when implementing the plan. 

Brokers earn money by recommending investments from a “preferred funds” list that gives brokers a cut of the revenue when their clients invest. As you may guess, this can create a conflict of interest if the broker chooses a fund that is "suitable," but not necessarily in the client’s best interest just because they get a kickback from it.

Find out if your financial advisor or wealth manager is registered as a fiduciary on the SEC’s Investment Advisor Public Disclosure (IAPD) website.

What is CEFEX-Certified?

CEFEX-certified financial advisors and wealth managers are the cream of the crop. CEFEX firms are required to uphold fiduciary practices that exceed the letter of the law and must agree to annual audits to confirm their approach. The audits are more rigorous and more frequent than SEC check-ins. 

Other benefits include:

• Access to multiple in-house services, including estate planning, tax planning, retirement planning, asset management, and more.
• Confidence in knowing that someone is constantly looking out for your best interest
• Personalized advice anytime you need it
• Strategies that make your money work harder for you 

Some signs you may be ready to move on include:

• They aren’t serving your needs
• Your trust has been broken
• You have to repeatedly ask for them to consider future needs and goals
• They charge you too much for too little
• Even with their support you feel very stressed about finances
• Your financial situation has gotten more complicated
• There is a lack of respect or understanding of your financial plan
  
  

Breakups aren’t easy, but if you keep the conversation professional and focus more on how you intend to move on, it should be a clean break. 

Step 1: Assess Your Current Advisor

As you become more successful, your finances get more complicated. Is your financial advisor growing with you or are they stuck in the past? As you evolve, a wealth manager will evolve with you and they are backed by an experienced team ready to tackle complex situations.

Here are six questions to ask your current advisor as you determine your options for moving on:

1. Will you put your fiduciary commitment in writing?
2. How do you get paid?
3. How do you make investment decisions?
4. Will you run a tax projection?
5. Will you review my estate planning documents?
6. Who will take over my account if something happens to you?

If their answers to these questions aren’t satisfactory, it’s time to look for someone new. 

Step 2: Evaluate Your Advisor Options 

Now it’s time to look for a new advisor, but where do you begin? It’s important to dig deeper than a firm’s marketing materials or website. Anyone can look good on the internet if they try hard enough! You must discover whether an advisor’s promises and claims are backed by sound policies and practices. 

Look into the firm’s:

• Advisor experience and credentials
• Expertise and depth of services
• Policies and wealth management approach
• Fee structure

Remember: Although your recent experience may leave you disappointed, don’t fall prey to taking on everything on your own. Seek a better experience guided by a professional.

Step 3: Interview a New Advisor

Now that a few candidates have passed your initial assessments, it’s time to interview them. It’s important to follow a structured list of questions and be sure to ask each candidate the same questions to give them all a fair chance at responding. 

Involve your significant other and print the same list of questions so you can individually score the candidates and compare notes. This may make the process of choosing an advisor easier.

Some questions you should ask your candidates:

• How do you get paid?
• Does your firm earn revenue from anyone other than clients?
• What other services do you provide?
• How are you PERSONALLY paid?
• Do you always act as a fiduciary and can I get that in writing?
• Do you have experience working with clients like me?
  
  

10 Scenarios Where You'll Want a Wealth Manager

As a general rule, it’s time to sign on with a wealth manager when your finances start to get more complicated and you’re no longer handling one priority at a time. 

1. Planning for retirement
2. Preparing for divorce
3. Passing of a spouse/partner
4. Exiting a business
5. Preparing taxes
6. Saving for higher education
7. Investing
8. Participating in employee stock
9. Inheriting generational wealth
10. Purchasing big-ticket items (house, car) 

Your wealth manager will help you with these three goals and all the steps in between — from gathering your financial data to monitoring and reporting on how your assets evolve according to your plan.

Disclosure

This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

Plancorp is a registered investment advisor with the Securities and Exchange Commission ("SEC") and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure and our Form CRS for additional information regarding the qualifications and business practices of Plancorp.