Entrusting your hard-earned money to a financial advisor is a significant decision.
When searching for the right professional, you want to find someone with the knowledge, experience, and drive to help you navigate your unique life and financial considerations.
If you earn a considerable amount of money, whether through your salary, equity compensation, your own business, real estate, and other investments, you’ll need a firm specializing in high-net-worth retirement planning and investment management.
What does it mean for a firm to specialize in high-net-worth wealth management?
What should you look for in a financial partner?
How can you ensure you make the right decision regarding an advisor?
Today, we’ll answer these questions and more!
You can also use our checklist of 25 questions to ask an advisor before you hire them.
What is high net worth?
There isn’t a legal definition of what it means to be “high net worth,” but most classify it as a range between $1 million and $5 million in liquid assets, including stocks, bonds, cash, or mutual funds. High-net-worth investors may also be interested in alternative investments like private equity, venture capital, and more.
Conversely, ultra-high net worth investors tend to have $5 million to $30 million, according to Forbes.
Why does it matter how much someone has saved?
It’s essential to consider this factor because different levels of wealth tend to be associated with different financial needs and concerns, so the strategies and investment advice an advisor uses and recommends will (and should!) differ.
Plus, the investment decisions you’ll make will also be distinct!
What does the wealth management firm specialize in?
First, identify if the firm you are considering even specializes in high-net-worth wealth management.
If they do, they should be able to explain what they do and how it is relevant to you. What the advisor says should also match what you find online about them and what they describe on their website.
So what are the magic indicators? Here are a few.
High-net-worth investment strategies - What do they invest clients' money in? High net worth individuals often have significant investments outside of tax-advantaged retirement accounts, which comes with unique considerations, notably tax-managed investing. Certain high-net-worth strategies can help maximize after-tax returns while also better managing risk to help preserve the wealth that you’ve worked so hard to build. There will also be different portfolio management strategies to consider to minimize taxes and maximize efficiency.
High-net-worth retirement planning - Your advisor should be able to develop a sophisticated distribution plan that takes all of your assets into account. They should also be able to advise you on the most opportune ways to get income in retirement, be mindful of taxes, and charitable giving strategies.
High-net-worth tax planning - High-net-worth individuals need to be very mindful of taxes, and your advisor should have a deliberate plan for how to address them in your situation. Charitable giving strategies and tax-efficient investments are likely tools.
High-net-worth estate planning - If you have considerable assets, you may also have significant goals concerning your estate. As such, you need financial services that also include your estate, like seamless wealth transfer, tax considerations, charitable giving, and legacy.
Are they required to put your best interests first?
Once you identify that your advisor has the necessary skills, you must ensure they also operate with your best interest in mind.
How will you know the answer to this question?
Ask the advisor if they are a fiduciary. If they are, they will be willing to put it in writing, so don’t be afraid to ask them to.
A fiduciary is legally required to provide you with recommendations that are better for you than for their firm's bottom line.
How are they compensated?
Make sure you understand precisely how the advisor gets paid and if they receive any commissions or revenue shares from products they recommend to you.
Ideally, you want a "fee-only advisor,” meaning your advisor cannot receive any form of compensation from the financial advice they give you other than what you pay them. This payment structure significantly reduces their incentive to make recommendations that are better for them than for you.
Your advisor may receive a percentage of the investments they manage for you, typically around 1% to .40% for high net worth individuals. The fee often depends on how much money your advisor manages for you.
Other fee-only arrangements include fixed, hourly, or even monthly subscription fees depending on the types of clients the advisor works with.
Are they trying to sell you or advise you?
This question goes hand-in-hand with making sure they are a fee-only fiduciary. If your advisor seems more interested in selling you a product, steer clear!
Wealth management, in all forms, should be led by action and advice rather than products. Products should help you implement a strategy—not BE the strategy.
What technology do they use?
What you are looking for concerning technology is that the advisor has the appropriate technology in place to manage and track your financial plan and communicate with you. Most wealth management firms use some form of commercially available financial planning software.
This software often allows you to link all of your accounts (even accounts not held with the advisor, such as your checking account) to make all of your information available in one place.
Ask to see a demo of your potential advisor’s tech. If you work with them, you may be using this software regularly, so it’s important that you feel comfortable using it and like how it looks and feels.
How do they communicate?
Ask them how, and how often, they communicate with you. You should pay attention to how your potential advisor answers this question because they should be willing to adapt to your preference within reason.
Will they call you once a quarter? Email once a month? There’s no right or wrong answer, but you want to know that they are communicating with you often enough and in a preferred method.
What are their credentials and experience?
Professional certifications are a way of verifying your advisor's field knowledge.
The Certified Financial Planner (CFP®) is a wonderful designation to look for. To earn the CFP® credential, an advisor must complete a comprehensive study program covering all the key topics in personal financial planning, pass a rigorous exam, and satisfy experience requirements.
Beyond that, other helpful credentials may include the Enrolled Agent or CPA since taxes are such an integral part of high net worth wealth management.
At my firm, Covenant Wealth Advisors, we have a team of CFP® professionals, a CPA, and an MBA. Our financial advisors average over 15 years of experience helping high-net-worth individuals.
The Right Firm Is Out There!
Finding the best high-net-worth wealth management firm for you can be intimidating because it’s so important to find an advisor you can trust. You also want to work with a firm that’s wealth management services are designed to help you reach your financial goals.
Selecting the right advisory firm is a big decision and should be taken seriously.
You have a lot of options in your search for the right advisor firm, from private banking to large financial corporations on wall street to independent registered investment advisor firms like ours.
As you explore your options, use our list of 25 questions to ask an advisor to help guide you.
We would love a chance to speak with you and show you how we can help.
Author: Katherine Fonville
Katherine Fonville is a personal financial advisor and fee-only financial planner and founder of Covenant Wealth Advisors.
She manages investment portfolios for individuals age 50 plus with over $1 million in investments.
Disclosures
Covenant Wealth Advisors is a registered investment advisor with offices in Richmond and Williamsburg, VA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.
The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.
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