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How to find a wealth manager

You need to do your homework before choosing a suitable wealth manager

Business has been quiet for wealth managers in recent years. However, things are beginning to change. Many financial planning agencies have seen increased numbers of late. But it is by no means an equal opportunities game. Wealth managers can be subject to a numerous variables in terms of cost, equities, conflicts of interest, investment approach and so on. So finding the right one for you is critical.

“There is a lot of stealth charging in the industry,” says George Flynn, associate director with Smith & Williamson Investment Services. “Everything from ongoing management fees, transactional charges, foreign exchange charges, trail commissions, etc. People should be wary of paying too little but they should also avoid paying too much.

“Performance is an issue,” he adds. “We suggest finding the right wealth manager who will strip away a lot of these costs, avoid conflicts of interest, charging management fees etc. You need to have your wealth manager sitting on your side of the table, with their interests in line with yours.”

‘Right questions’

So how can one distinguish the good from the bad? It’s very simple: the bad ones don’t ask the right questions,” says Flynn. “But it is incumbent on the client to do their homework. Assess if there might be any conflicts of interest. For example, you must look at the wealth management firm’s ownership structure. Is it an independent firm? Do the senior management own equity in some shares? Those that own their own firms take a longer view. Those that don’t are commission driven.

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“Still, many people look at the headline fees and make their decision based on that.”

Nigel Poynton of Investec agrees that conflicts of interest are something to be aware of. “Are you only being sold internal products, branded by that entity, or are you getting a ‘best of breed’ solution?” he asks. “Our advice is that clients should always seek an independently constructed portfolio.”

Poynton also advises looking at the depth of resources in a firm. Is it a one-man band, or do they have expertise and experience, both nationally and internationally?

“We’re managing over € 60 billion worth of assets, over several regions. When you deal with a competent wealth manager, he/she should have adept financial planning skills as well as investment savvy. Do the two intertwine? They should.”

Provide perspective

A good wealth manager will also be able to provide perspective, especially for those new to the game. Understanding the short-term volatility of stocks and markets is key to keeping a cool head. “I spend a lot of my time with clients who are not the most financially savvy,” says Poynton. “So education is crucial. We weigh up the pros and cons, and assess how someone might cope in a stressed environment. I see clients who, even though they are investing over a 20-year long-term basis, consider selling everything because of volatile events in one month. People make short-term panic decisions.”

In addition, the planning side is getting more complex. “Family structures are changing,” says Poynton.

“The traditional family structure of a heterosexual couple with children is not as common as it used to be.

“Things have changed and people have multiple marriages, which has led to inheritance complexities. That’s why tailored advice is needed more than ever before. Another important aspect to assess is what kind of interaction you are likely to have with any potential investment manager, says Flynn.

“You should have a direct line to those managing your money. Middle men won’t have enough in-depth knowledge of the portfolio.

“You need someone who can give you the best options, as it is in your and their interests to make money. It’s all about trying to align our interests with our clients’ interests.”