Working With a Wealth Management Advisor

Who Needs a Wealth Management Advisor?

Most people don’t need high net-worth wealth management. Many will need one – perhaps even several – of the services a true wealth manager provides, but only high-net-worth individuals need wealth management. The key services you need as a high-net-worth individual include:

• Investment management
• Risk management
• Retirement planning
• Tax planning
• Estate planning
• Trust services
• Philanthropic planning

Each of these service areas can be further broken down into several subsidiary services, but hopefully, just looking at these key services, you are struck by the breadth of true wealth management. Each area is key to preserving and growing your wealth and passing it on to your heirs and favored causes. As a high net-worth individual, you have achieved a level that requires this all-encompassing approach. You need wealth management, and you shouldn’t settle for less. 

The Wealth Management Approach

The correct approach for successful wealth management is comprehensive. It’s a holistic approach. Effective wealth management advisors integrate all key areas of your financial situation to ensure that all areas function correctly and allow you to achieve your goals. 

Some people are tempted to do this alone, but this is a recipe for disaster. Effective wealth management is complicated enough to demand the services of a trained, experienced, and objective wealth management advisor. Of course, using your newfound free time to research one of these areas and develop some skills there is possible. But the odds of you developing the necessary expertise across all the areas required by comprehensive wealth management without making a major blunder are slim. Just take a look at the complexity of these tax strategies to get an idea.   

A professional wealth manager, like First Financial Consulting, will start by asking questions. We don’t jump to investment recommendations or start with discussions of performance. Those are back-end issues that flow out of a comprehensive wealth management plan. To develop a customized wealth management plan, we start with foundation questions which include:

When do you want to retire?

This question tells us how many years are available to improve accumulation strategies or change diversification techniques before the transition.

What are your living expenses now, and what will they be in retirement?

It’s important to understand what expenses will continue, which will be dropped, and what expenses you’d like to add. Do you want to travel, give more to charity, help the kids/grandkids, etc.?

What legacy do you want to leave, and to whom?

Understanding where you might want to make gifts is critical to managing wealth. Not only do you want to enjoy your assets, but most high-net-worth individuals want their heirs and/or favored causes to be blessed as well.

What protections do you want to provide your heirs from taxes, financial malfeasance, or lawsuits?

Structuring your estate plan to protect your heirs from the tax man, lawsuits, and their potential mistakes is possible. Read more about the top nine most common estate planning mistakes to avoid. 

What are your key assets and liabilities? What do they earn, and what cash flow do they generate?

These questions uncover how your current assets are helping or hindering you from achieving your goals.

How are they going to change?

If there is a planned or contemplated lifestyle change or liquidity event, you must understand how it might change your situation and your ability to achieve all your goals.

What are the risks to your current situation, and are they being mitigated?

As we wrote above, having more assets means having more to potentially lose. Life is uncertain, and the economy and markets are too. You need to understand what events could negatively impact your wealth and your goals and then take appropriate actions to mitigate or insure against them.

What specific goals are appropriate for your investment assets?

Most high-net-worth individuals do not know what rate of return their assets should earn, nor what level of volatility and downside they are exposed to. This is a critical lapse. You need to know exactly what the targeted rate of return is and what downside is possible with that target return. You need to be able to hold any wealth management advisor accountable for achieving that goal without incurring more risk than you’ve agreed to accept.

How often do you want to review your situation going forward?

After a detailed wealth management plan has been developed and implemented, all the key components and assumptions should be revisited frequently. That frequency should reflect your desires and calendar schedule, but it needs to be regular and consistent. You cannot afford to lose track of your progress.

What other questions need to be asked in your specific situation?

The questions above are just the starting point. Based on your unique situation and goals, additional detailed questions will be important. Your wealth management advisor needs to take the time to ask and address all of these.

That wealth management plan should be thorough, detailed, and presented in a format that gives you confidence that your goals will be achieved and that your risks are being effectively mitigated. A truly professional wealth management advisor will cover all of these and then develop specific solutions around the answers to these questions.

Unfortunately, many “advisors” rely on software programs that generate lots of pages and charts, diagrams, etc., to convince you the plan is right. Too often, these miss the mark, are confusing, and leave you wondering whether you’re going to achieve your goals. Never mistake quantity for quality. If you don’t have confidence in the plan, you will not effectively implement it, and you certainly won’t stick with it.

Wealth Management Is A Relationship

One of the most important parts of the wealth management approach is the wealth manager’s relationship with the client. The process described above takes time. A professional wealth manager should be willing to take the time to go through the process with you to thoroughly understand every part of your current situation and your goals – both your financial and personal goals. 

But time alone is not enough. The best wealth managers build a relationship with their clients. You don’t want the experience to feel like a police interview in a small cubicle behind a one-way mirror. You don’t want the experience to degenerate into a list of questions with the answers simply fed into a computer for a pre-loaded plan to be prepared. 

At First Financial Consulting, we take time to get to know our clients and certainly ask questions (just see the list above). But each question can lead to a different follow-up question, to a nuanced understanding of the client’s situation, goals, and risks, to a critical subjective need that must be met, or to a better understanding of a deep-seated fear which must be relieved. We care enough to delve deep and build relationships that allow this to happen naturally and comfortably. 

You should also feel comfortable enough to ask your financial advisor questions about how they operate. 

We realize that you care what we know; we have to be good at our jobs. But you also need to know that we care. Suppose an advisor doesn’t really care about the client as a person or doesn’t understand the profound impact advice can have on an individual’s and their family’s life. In that case, the client isn’t going to share, isn’t going to trust, and ultimately isn’t going to be as successful. At First Financial Consulting, we care deeply about the people who come to us, about their future, and about the future of their heirs, who will be impacted in profound ways by the work we do with clients.

What Types of Wealth Management Firms Are There

Wealth management firms run the gamut from large multinational firms to small one-person self-employed advisors. The size and structure of a wealth management firm often impact the ability of the wealth manager to meet your needs and master all the key areas necessary for the client.

Too small a firm usually means there will not be sufficient resources for the wealth management advisor to truly become a professional wealth manager. They won’t have experience in all the key areas and won’t be able to keep up to date on the inevitable changes that occur. Just keeping up with changes in the tax code can be overwhelming, let alone trying to also monitor changes in investment options, risk management, retirement tools, estate planning, and estate planning techniques. 

There is a critical mass that is important, but being too big causes its own problems. Almost without exception, the wealth management advisors I’ve met who work in a major multinational institution have more clients than they can possibly handle, and they are economically motivated to move up the career ladder. They earn more by being promoted to the next level. When they do, someone else must step in and take over their client relationship. This scenario is not conducive to personal, tailored wealth management or long-term success since clients inevitably lose confidence in the plan.

Some wealth management advisors aren’t advisors at all; they’re just the spokesperson for some computer software robot in the background which is making all the recommendations – and making the same recommendation for every client in every situation.

In the middle are the boutique, elite private wealth management firms. Like First Financial Consulting, these firms have enough critical mass to keep up to date with changes in the financial and legal landscape. They also hire dedicated wealth management advisors who remain focused throughout their careers on building relationships with their clients to help them achieve their goals. Many of our wealth management advisors have worked with the same clients for years – guiding them through all phases and stages of life and then working with their kids and grandkids. It’s an admirable profession for those who want to serve and can do it well. 

What Credentials Should A Wealth Management Advisor Have

There is no official designation of “wealth management advisor.” Unfortunately, it is a title that any advisor can put on their business card or website. That doesn’t mean there aren’t credentials that a true wealth manager should achieve. There are several certifications that provide evidence that the advisor has studied and mastered a body of knowledge that gives them the expertise to become a true, professional wealth manager.

At First Financial Consulting, we have found that the CERTIFIED FINANCIAL PLANNER™ (CFP), certified public accountant (CPA), chartered financial analyst (CFA), and master of business administration (MBA) offer the best training, well-rounded focus, and ongoing continuing education requirements to keep wealth managers sharp and up to speed. 

There are others to be considered, and FINRA provides a detailed list, but we consider the CFP, CPA, CFA, and MBA to represent the crème of the crop. In all cases, though, you should work with an accredited individual employed by a firm that supports and values the effort required to attain and maintain those designations.

Do I Need a Wealth Management Advisor?

Not everyone needs wealth management, but for those who do, it is critical that you understand what true wealth management represents. Find a professional wealth management advisor who cares and will take the time to build the necessary trust and relationship so they can help you with all the aspects of building, enjoying, preserving, protecting, and passing on wealth.

Furthermore, you should do your homework to confirm a wealth manager’s ability to live up to the high standards needed in this profession and make sure they work for a firm that invests in those individuals so they can invest in you.

We at First Financial Consulting are proud of our 45+ year history of successful, individually tailored wealth management. We judge our success by our clients’ success. We have been working with many of our clients and their families for 30+ years, and we never take the responsibility inherent in this work for granted. We remain committed to supporting our great team of wealth managers and support staff so they can help you in all phases and stages of life. If you’d like to begin a conversation about how we can help you, please use the link below to schedule a complimentary introductory appointment.