Think financial planning is only for people planning to build wealth?
What if you already have wealth?
I’ve written about how financial planning helps build and protect wealth; in this article I’ll speak to wealth management for those who are already “there.”
The term “wealth management”, especially in affluent areas like Scottsdale, is widely used in marketing materials, on business cards, and in firm names like ours.
In fact, search terms like “Wealth Management Scottsdale” often draws traffic to the Life Moves Wealth website.
Wealth management as a practice generally includes a suite of investment, banking, and lending services reserved for high net worth (HNW) and ultra-high net worth (UHNW) individuals.
As a matter of definition, HNW individuals are those with liquid assets valued at $1 million or more. UHNW individuals have at least $30 million in investable assets. Some banks and investment firms begin UHNW programs at $10 million or more in investable assets.
There are nearly 7 million or so HWN individuals and approx. 70,000 UHNW individuals in the US alone. These number have moved around over the past year due to current draw downs in capital markets.
HNW and UHNW individuals are heavily courted and heavily celebrated as clients. Your primary concerns tend to center around the preservation of your wealth and the reduction of tax exposure.
If you are searching for the right advisor, what you probably want is someone to listen to your story, your wants, and your concerns. Emphasis on the word listen… you want to be heard, understood, known.
What you often receive is a slick presentation of sophisticated investment strategies pitched by people in a room full of suits. You hear talk of tax efficient investments, yet the advisor pitching you has likely never asked to review your tax return with your trusted CPA. In fact, if the advisor wants to meet your CPA, it’s probably more to serve their purposes than yours.
You are being targeted by every advisory service in your town. When you are considering the type of advisor to serve your family and wealth management needs, here are 4 things to consider:
Many advisors, especially those at larger banks and investment firms, operate under a suitability standard. This means they will manage your investments and other financial affairs based upon your level of assets. If you meet qualified or accredited standards, the recommendations will be deemed suitable.
But, are the recommendations truly in your best interest? Is the advisor required to put your interests first?
If you’re not sure, ask specifically which standard they are bound by (hint: a CFP® will always answer this question directly).
Often at the end of their big pitch, you will see a fee schedule for investment advisory services. Keep in mind this fee schedule only applies to what the advisor is charging and does not reflect the internal expenses of the portfolio, nor does it include commissions on certain investment or insurance strategies.
Wealth management may include sophisticated investments and big insurance contracts for estate planning, but what else is the advisor looking at? Do they have a good understanding of how your cash flow works? Your employee or business owner comp plan? Your time frame for selling large assets, or potential for inheriting additional assets? And with all of these factors, your current and long-range tax considerations?
If they say they “do” financial planning but aren’t digging deep and asking some tough questions, they indeed are not “doing” financial planning.
Sorry. Those are the words. Actually, you’re probably being called a “whale” behind closed doors. Any advisory firm has a lot to gain by bringing on larger clients, and you have a lot to gain when you find find the right advisor.
However, you know when someone is building a genuine relationship with you vs. “reeling the big one in”. Are they reaching to make a real connection with you? Or, are they just reaching for your money? Trust your instincts on this one.
Choosing the right advisor for you is a process of interviewing. The name on your statements, the high rise office, and even professional credentials may not tell you all you need to know.
Ask questions. Expect to be asked questions, and expect the advisor to listen. If the advisor needs to fill space and talk more than you – or worse talk over you, especially if you’re a female – you may be in the wrong room.
At the same time, you also have a responsibility in these interviews. The advisor is likely a professional with a lot of experience; treat them as a professional with a lot of experience. If you feel like the advisor can be ordered around without much resistance, you may be in the wrong room.
Bottom line: did you make a real connection with the advisor?
If you didn’t get a great first impression, keep looking. Yes, it’s exhausting and you have other things to fill your schedule. You’re looking for someone you like, get to know, and learn to trust.
Your wealth management advisor, whether in Scottsdale or anywhere else in the country, is one of the most important professional relationships you can have.
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