Identifying True Wealth Managers
- While many financial advisors call themselves wealth managers, they offer only investment management.
- We believe that true wealth managers do all the following:
- Address clients’ advanced planning concerns
- Use a consultative process when working with clients
- Work with a network of professional advisors to access needed expertise
If your family is like many successful families, you need a comprehensive approach to your financial life. You need true wealth management.
So if you choose to work with a financial advisor, consider one who uses the wealth management approach. Many in the financial services industry today call themselves wealth managers while offering little more than investment management. How will you know whether you are dealing with a true wealth manager? In our experience, genuine wealth managers are characterized by the following.
1. True wealth managers address advanced planning concerns
True wealth managers do more than just take care of your investments. They also have the ability to address your advanced planning needs—all those financial concerns beyond investments, including wealth enhancement, wealth transfer, wealth protection and charitable giving.
2. True wealth managers use a consultative process
Research on the best practices of leading wealth managers shows that they use a consultative process with their clients¹. This allows them to uncover their clients’ deep-seated financial needs and goals, to craft long-range wealth management plans that will help meet those needs and goals, and to build ongoing relationships with their clients that help ensure that their needs continue to be met as they change over time.
The consultative process usually unfolds over a series of meetings:
At the Discovery Meeting, the wealth manager determines the individual’s (or couple’s) current financial situation, financial goals and any obstacles that may stand in the way of reaching those goals. In addition, the wealth manager will ask detailed questions about key nonfinancial issues, such as values, interests and important relationships. Using the answers, the wealth manager will create an in-depth profile of the most important aspects of the individual’s life.
At the Investment Plan Meeting, the wealth manager, using the information he or she gathered at the Discovery Meeting, presents a complete diagnosis of the individual’s current financial situation and a plan for working toward his or her wealth preservation-related goals.
At the Mutual Commitment Meeting, assuming that the wealth manager can truly add value to the individual’s finances, both the wealth manager and the individual formally decide to work together.
At the 45-Day Follow-up Meeting, which usually takes place about six weeks after the Mutual Commitment Meeting, the wealth manager helps the client to organize the paperwork from the new accounts that have been opened and answers any questions the client may have.
At Regular Progress Meetings, which are typically held quarterly, the wealth manager reports to the client on the progress toward achieving his or her goals and checks in about any important changes in the client’s life that might call for an adjustment to the investment plan.
In addition, at the first Regular Progress Meeting, the wealth manager presents an advanced plan—a comprehensive blueprint for addressing the client’s advanced planning needs that has been developed in coordination with the wealth manager’s network of professionals (which we describe below).
At subsequent progress meetings, the client and the wealth manager decide how to proceed on specific elements of the wealth management plan. In this way, over time, every aspect of the client’s complete financial picture is addressed.
If you decide to work with a wealth manager, keep in mind that you are an active participant throughout the process. At every step, re-examine your commitment to the process and make sure that you have the information you need to make informed decisions.
3. True wealth managers work with networks of professionals
Just as no one person can know all subjects, no one wealth manager has the skills and experience to address the entire range of advanced planning needs beyond investment management. To provide their clients with the required knowledge and experience, wealth managers frequently work with networks of carefully selected financial professionals.
The illustration below provides an overview of the consultative process and how it is supported by the wealth manager’s network of professionals.
Typically, a wealth manager will create a core network composed of three professionals:
A private client lawyer who is skilled in estate planning, wealth protection planning, succession planning and developing charitable giving programs
An accountant who deals with matters of income tax planning and cash flow
An insurance specialist who works closely with the private client lawyer to identify and structure solutions that leverage the entire range of insurance options
As needed, the wealth manager should be able to bring in additional professionals to address highly specific challenges. These professionals might include credit specialists, corporate tax lawyers, actuaries, derivatives specialists and securities lawyers, to name but some.
When appropriate and as the client chooses, the wealth manager also works closely with the client’s other professional advisors, such as attorneys and accountants. This helps ensure that the perspectives of professionals who may have additional or unique insight into the client are included in the client’s wealth management plan.
The Consultative Wealth Management Process
Now that you know what a true wealth manager looks like, how will you find the one who is a good match for you and your family? To help you, we have developed a comprehensive checklist for selecting a financial advisor. You can download it here.
And if you are currently working with a financial advisor and are unsure whether he or she is using the wealth management approach we describe here, we recommend that you have another financial advisor provide a second opinion after evaluating your situation. Financial Advisor Select can match you with a financial advisor who will provide you with a second opinion.
¹ Source: CEG Worldwide, 2007.