How to choose a wealth manager?

Protect your nest egg and achieve your financial goals with the right advisor.

Written by Tom Yeung, CFA | CDFA Investment Advisor & Fund Manager, Jurnex Financial Advisors

Finding the right wealth manager is one of the most important financial decisions you’ll ever make. That’s because you only go through your investing life ONCE. You need to stay on the right track, and that’s one of the essential roles of a great wealth manager.

But when it comes to choosing a wealth manager, it’s hard to know where to begin. There’s a lot of information out there, and different managers specialize in vastly different areas.

As a wealth manager and financial advisor, I get it. The choices can seem overwhelming!

So this guide will cover the nine things to know to help you choose a wealth manager.

What is wealth management?

Before we cover HOW to choose a manager, let’s first cover the basics of wealth management.

A wealth manager is a type of financial advisor who specializes in helping affluent individuals and families. Many wealth managers also offer investment funds. Some services provided include

• • Investment and business advice
  • Cashflow advisory and management
  • Legal and estate planning
  • Accounting and tax services
  • Retirement planning

How much money do you need to start?

Wealth managers typically require at least $100,000 but can be as high as $10 million for some prestige banks.  Typically, minimums range from $250,000 to $500,000.  Here at Jurnex, for instance, we work with clients with $350,000 or more in investable assets.

What if you aren’t there yet?

Wealth management isn’t only for the wealthy. Those looking for financial advice can also consider talking to financial advisors or financial planners. These firms often work by the hour, and many offer similar services as full-service wealth managers.

At Jurnex, for instance, we will work with clients on an hourly basis who don’t meet the minimum $350,000 investment.  That allows us to help people get on the right investment path to later become investors with us.

Do you need a wealth manager?

In reality, any qualified investor can benefit from professional advice. That’s because anyone can gain from organizing their investments and optimizing their taxes. Even experienced investors often consult advisors for specialized knowledge, or to cross-check their investment decisions.

Why choose a wealth manager?

According to Dalbar Research, the average investor LOST 9.4% of their portfolio in 2018 by selling at market bottoms. The right wealth manager can help you overcome these psychological biases and stay invested when it matters most.

The right wealth manager will also know how to balance your needs with your ability and willingness to take risks.

Choosing the right wealth manager can help you achieve long-term goals. That’s why you need someone who cares about YOU.

How to choose a wealth manager

Now that we’ve covered the importance of selecting the right person, here are the nine steps to take when you choose a wealth manager.

1. What kind of wealth manager do you need?

Wealth management firms fall into three main categories

• • Full-service bank. Also known as private banking, these firms look to extend banking services to high-net-worth customers. Investment minimums typically start at $3MM.
  • Financial service company. These are larger firms, such as Edward Jones and Ameriprise, that offer insurance, annuities, as well as wealth management.
  • Independent advisors. Smaller firms, like us at Jurnex, serve specific niches and investment sectors.

Typically, the larger firms will focus on the breadth of service, while smaller companies tend to be specialists. According to AMG Funds, smaller firms also tend to outperform the market by 1.5% per year. That’s because boutique firms are more likely to close funds to new investors that grow too large.

2. What’s your investment style?

Most wealth managers focus on a particular investment style. Because it’s YOUR nest egg, it’s critical to find a wealth manager that has the right fit. Studies show that client investment styles tend to converge with their advisors’ over time.

When it comes to investment style, wealth management companies typically fall into one of three categories.

• • Purely passive. These managers usually only use broad-based index funds and focus on risk management, estate planning, and other financial services. These companies rely on their quality of service and breadth of offerings.
  • Purely active. Often heavily invested in hedge funds or real estate developments. These companies generally look to outperform the market.
  • Hybrid. These firms use a mix of passive and active management. Hybrid models combine the best of both worlds, allowing diversification as well as investment growth. Learn more about investment diversification.

3. What’s the wealth manager’s personality?

When you choose a wealth manager, you’re also selecting a financial advisor. And the better you connect with an advisor, the better your outcomes will be.

That’s because talking about money is hard. According to Wells Fargo, 44% of Americans see money is the #1 toughest thing to discuss with others. That’s ahead of health, politics, death, and religion.

The right advisor can help you overcome these cultural barriers. By openly discussing your financial goals and fears, the right wealth manager can will be better equipped to help you plan for the future.

It’s essential to find a wealth manager that’s ethical, straightforward, and risk-aware. Because in due course, that’s how your investment portfolio many end up.

4. Where is the wealth manager located?

When choosing a wealth manager, you’ll eventually have to pick either a local, regional, or national advisor.

• • Local. Best knowledge of local trends, such as real estate investing and local taxes.
  • Regional. Tend to be specialists (i.e., divorce cases, LGBT) whose skills are highly sought-after.
  • National. Typically, private banking companies have multiple branches for the convenience of their clients.

Many advisors will only take clients in particular states. That’s because financial advisor licensing is generally mandated on a state-by-state level. However, licensed advisors are permitted to take up to 5 clients per state without registering with the local financial authorities.

5. How knowledgeable is the wealth manager?

When it comes to overseeing wealth, experience matters. That’s because investing takes on so many different dimensions, spanning finance, taxes, laws, and psychology.

Even the best managers often require a team. For example, we at Jurnex use Charles Schwab to assist in brokerage and research. Having the right organization means wealth managers can become better equipped to answer a wide variety of questions

What to look for

• • Company specialty. Does the parent company have a particular specialization?
  • Work experience. Does your wealth manager have the right knowledge that meets your needs?
  • Education and designations. How knowledgeable is the wealth manager? Do they have advanced designations such a CFA, CFP, or CDFA?

6. Is the management fee structure understandable?

By federal law, every registered advisor must file their fee structure with FINRA, the governing financial watchdog. However, this doesn’t mean their fee structures are transparent.

Wealth management fee structures have grown increasingly complex with time.

Common fee structures

• • Assets under management (AuM) and fee-only advisors typically charge charges a small percentage of assets under management (1.0-1.5% fee)
  • Hourly rate advisors work on a retainer as-needed basis to work on specific questions or projects.
  • Commission-based advisors make money through product sales. Every time you purchase a stock or insurance product, the adviser will receive a small commission.

What’s the best fee structure?

Usually, fee-only structures offer the most straightforward compensation model that aligns the wealth manager’s incentives with what’s best for the client. Commission-based wealth managers, on the other hand, are only paid when you make trades. There’s a constant temptation for these managers to have you over-trade (also known as churn) to generate more commissions.

7. Does the wealth manager deal with unique situations?

Every individual and family has unique needs, and your wealth manager needs to have the right experience. Here are some typical specializations

• • Tax optimization. People who own multiple residences or own personal businesses.
  • Divorce and widowing. Individuals who have separated or lost a significant other
  • Disability, medical conditions, or special needs. Families who need to navigate medical insurance or special education.
  • LGBT advisory. LGBT individuals and families who are looking for a greater understanding of their situation.
  • Multi-generation. Families that are looking to pass wealth between multiple generations.

8. Does the manager pass BrokerCheck?

Before you settle on a wealth manager, you need to make sure they’re trustworthy.

But how can you know?

Fortunately, FINRA runs a free service that tracks every licensed advisor in the United States. They collect a wide variety of information, including a history of financial crime, personal bankruptcy, and any complaints issued by clients. FINRA also sanctions brokers who fail to follow FINRA regulations. Doing so helps prevent the recurrence of misconduct.

To look up your broker, you can either type their name into the search bar here or ask the firm for their CRD number.  Keep in mind that not only will each COMPANY have a CRD number.  Every ADVISOR within that company must have an individual number too.

BrokerCheck is one of your most powerful tools in evaluating a wealth advisor.

9. Have you talked to at least three managers?

When choosing a wealth manager, there’s a strong temptation to go with the first one you meet.

Don’t do that!

Finding the right wealth manager is worth it. That’s because there are few things more important than getting your investments right today. The power of compound interest means a dollar saved in your 40’s can be worth $5-6 in TODAY’S dollars by the time you retire. And the right wealth manager can help make sure you or family members will have enough money to sustain a great lifestyle in retirement.

Conclusion: how to choose a wealth manager?

If this seems like a lot of information, don’t worry. The great news is you don’t have to do it alone. That’s because here at Jurnex, we can help you uncover what you’re looking for in a wealth manager. As a fiduciary, our charge is to help YOU find the best possible outcome. So while we would love to work with you, we understand that choosing the right wealth manager is a personal decision that not only involves investment skills but also on personal fit.

Where to find more resources

If you’re looking for even more investment tips, you’ve come to the right place.

That’s because I’ve helped invest client money for over a decade in the same old-fashioned way: seek out great companies in great industries that can be purchased at a discount to their fair value.  Sounds too simple to be true? Give me a call today and I’ll show you that it’s still possible after all these years.

About Jurnex

We are an independent registered investment advisor and asset manager.  We have the securities backing of Charles Schwab, yet we retain our operational independence from any third party. This means you can have the confidence your money is safe with one of America’s best brokerages and still receive knowledge and advice from an independent firm focused on YOU.

Want to learn more?