Wealth Management: What to Look for When Choosing a Financial Advisor (2024)

By Greg Paeth

Wealth Management: What to Look for When Choosing a Financial Advisor (1)

Although they might not say it in so many words, that time-tested “one chance to make a first impression” adage seems to be extremely critical to wealth management professionals when they initially sit down with a first-time investor.

Over and over again, wealth managers stress that any agreement to handle a client’s investments and his or her financial future—sometimes every penny they’ve acquired in their lives—is routinely based on trust and the rather nebulous “comfort level” that can be established between the manager and the “prospect,” from that first encounter right through a long, comfortable retirement.
Relationship emerges as paramount because many of the services provided by wealth managers are closely regulated and, in many ways, duplicate those offered by the firm next door or around the corner.

Wealth managers typically offer a broad menu of services that include financial, retirement and estate planning, investment advice on stocks and bonds, business-succession planning, optimizing the return when a business is sold, tax strategies, creating trusts and, perhaps, establishing a special account that might cover college tuition for a grandchild or a cash gift on a milestone birthday.
But even an extensive array of services and attractive management fees rarely trump one-on-one relationships, most managers said.

“It’s all about finding the right fit,” said Pamela F. Thompson, managing director and senior wealth advisor for Mariner Wealth Advisors, which has 94 offices across the country, including Louisville, New Albany, Ind., and Cincinnati. “As much as the things we talk about are financial—stocks and bonds and taxes and planning and all that—it’s really a people business as much as the rest (of the financial services). It’s really about finding the right fit with an advisor because there’s a tremendous amount of trust that goes into that relationship.”

Thompson oversees the Louisville and New Albany offices and has an office in Cincinnati. In addition, she has served as one of nine members of the Kentucky Retirement System board for the last couple of years.

“You have to sit down and talk,” Thompson adds. “It’s not like there’s one magic question (where they say), ‘Yeah, you’re a good fit for me.’”

Patty Breeze, president and owner of Breeze Financial in Lexington, agrees.

“People will say, ‘I really want somebody to sit down and talk to me face to face.’ There are a lot of these robo-advisors out there, but I think people still want that personal touch.”
From Breeze’s perspective, there’s minimal person-to-person interaction with a “robo-advisor” who merely plugs a client’s information into a computer and waits for the software to make recommendations, all calculated online.

“It is extremely important to establish a good relationship with a prospective client, and the relationship must be based on mutual trust. All our clients are considered friends at different levels,” said Stephen L. Grossman, managing director, financial advisor and branch manager for the Lexington office of Baird Private Wealth Management, which has 155 offices in the U.S. and a track record that dates back more than 100 years.

Where to start
“The whole notion of finances and wealth management and financial planning—if that’s not what you do (on a regular basis), it can be overwhelming,” said Angela C. Coleman, a fiduciary, investment advisor and certified financial planner with American Trust Wealth in Lexington.

“People will come in and ask, ‘Where do we start? I don’t even know what the first step is,” Coleman said. “A lot of people seem a little embarrassed to ask some general (financial) questions. If an advisor makes you feel like your questions are not good questions, silly or naïve, then that’s not the advisor you need to work with.”

Steven L. Frank lives in Covington and works as managing director of investments for Skyline Wealth Consulting Group of Wells Fargo Advisors in Cincinnati. A former Covington city commissioner, Frank is also a certified financial planner.

“We’ve taken the approach of building a multigenerational practice that is able to service our original clients, their children and grandchildren, but even here we are selective about adding new relationships,” Frank said. “We will add new relationships, but they have to be a good match for what it is we do.”

A good relationship with your advisor comes from trust, said C. Kelly Buckley, managing principal and director of asset management for Spectrum Financial Alliance.

“Trust is earned and should begin with concrete evidence of past achieved performance excellence and outstanding service,” he said.

Buckley provided a six-point checklist that investors should use when evaluating an investment firm. Three of those bullet points zero in on returning phone calls and emails promptly and communicating frequently with clients.

The advice, counseling and planning expertise on wealth managers’ services menus reflect how the business has changed in a relatively short time span, Grossman said.

“Back when I started, you were charging for the transactions (buying and selling securities, for example), but giving away your advice for free. Now we give away the trading and the transaction side for free and we charge for the advice. That transition has been going on for 25 years,” Grossman said. Today, he said, Baird’s emphasis is “comprehensive wealth management.”

From all indications, Kentuckians value the expertise of Milwaukee-based Baird. The Louisville office ranks second in the country and the Lexington office, which has grown explosively with Grossman at the helm, ranks seventh.

Wealth Management: What to Look for When Choosing a Financial Advisor (2)

What the new client should ask
After talking with and/or exchanging emails with six financial advisors for this interview, it became clear that it’s difficult to nail down exactly what question might be at the top of the list during a prospective client’s initial meeting. One reason it might be tough to pinpoint is that 99% of the time the prospect has accumulated some degree of wealth and, presumably, has some level of financial savvy. Other clients might have plenty of investment acumen because they’re simply moving from one manager to another.

Frank, with Skyline Wealth, said routine questions focus on experience, philosophy, scope of the financial practice and what the management service will cost.

Coleman said key questions for a first-time investor should establish whether the firm is a fiduciary and details about the fee structure.

“Most of our clients have general goals. The majority are defining their goal as, ‘I want to make sure I can live a comfortable life without running out of money…’ (That’s) the most common goal,” said Mariner’s Thompson.

People want to make sure they have enough money to take care of themselves and their families, Grossman said.

Nearly all, even if they’re in their 20s or 30s, want to start saving money that will help them when they eventually retire, Breeze said, and those getting close to retirement want to make sure that they don’t outlive their money. Others want to save so they can start their own business or help someone who is disabled, she said.

The fiduciary approach
Most of the wealth managers interviewed stressed that their firms are fiduciaries, a designation that appears to be used more and more frequently because of the seemingly endless TV commercials for Fisher Investments, a $205 billion firm in Plano, Texas, that hammers home its pledge to put the client’s interests before those of the company. Fisher’s consistent message is: “We do better when our clients do better.”

“We are a registered investment advisory (RIA) firm, which is different from brokerage firms. We are a fiduciary 100%—legally obligated to do only what’s in their (a client’s) best interest. End of story,” Thompson said.

“When we talk about wealth management professionals, we are only talking about people who operate as a 100% fiduciary and receive no income whatsoever from commission products, no sales incentive trips, no dinners paid for by the investment company or wholesalers, etc. In other words, no inducements to affect our independent professional judgment,” said Buckley of Spectrum, which is an RIA located just outside of Lexington in Nicholasville.

American Trust is also a fiduciary.
“We were certified as a fiduciary before it was kind of the in thing to be, before it was it was just a buzzword in the industry,” said Coleman. “We were taking our obligation to put the client’s interest very seriously above our own long before we were ever required to.”

Besides offering similar services and sharing similar attitudes about establishing drama-free relationships, there are also some similarities among the different firms in terms of investment minimums and the fees that are charged.

With the exception of Breeze and Coleman, managers said they typically work with clients who have at least $500,000 in an investment portfolio.

What size portfolio is needed to work with an advisor?
Thompson said a typical client for her will have a portfolio of $1 million while Skyline Wealth’s Frank said the “sweet spot” for his firm generally is between $500,000 and $5 million. Grossman said most of Baird’s portfolios are in the range of $1 million to $1.5 million, while Buckley said Spectrum has a minimum investment of $500,000 with a median net worth of about $1 million for clients.

Breeze said she works with some people who have less than $100,000 to invest and that the average investment portfolio she handles is between $200,000 and $250,000. However, some clients have “several million” under her management, she added.

Coleman said American Trust looks for a minimum of $300,000 in “investable assets” although it does offer a program that serves investors with just $50,000 as long as they agree to add to that total on a regular basis. “We pay close attention to emerging affluents who are just starting to build a portfolio,” Coleman said, adding that some of these clients recently landed their first “real job.”

Most of the firms said fees are set as a percentage of the overall portfolio and range from a low of about 0.5% to a high somewhere around 1.5%. And although it might seem counterintuitive, higher fees are paid by clients with smaller portfolios because it can, in theory, take just as long to manage a small portfolio as it does for one that’s 10 times larger.

Charging that higher fee for smaller investors creates some uniform compensation for wealth managers who are then paid about the same for working on all portfolios, regardless of their size.
Over and over, the managers stressed that the investment minimums and the fees aren’t chiseled in stone and can be negotiated. Some firms also provide some reduced fees and minimums for members of an investor’s family.

Wealth Management: What to Look for When Choosing a Financial Advisor (3)Life events trigger finding an advisor
Besides planning for a comfortable retirement, managers said there are myriad reasons why people seek help with their finances.

Skyline Wealth’s Frank said it is usually prompted by a life event—such as a job change, birth of a child or grandchild, a divorce or an inheritance—or perhaps a conversation with their CPA or attorney.

Buckley said a huge percentage of his new clients are referred by existing clients. “Usually, the person referred is in a tough spot, financially, due to gross mistakes by a nonwealth management professional advisor,” he said.

“We do have higher net worth clients who are new investors if they’ve had a liquidity event” such as selling a business or receiving an inheritance, said Mariner’s Thompson, adding that some people never sit down with an advisor until retirement is imminent.

Some people “are just making decisions following some hot tip or watching (Jim) Cramer on CNBC and then realize that this is not a good strategy for their life savings,” she said.

Grossman also mentioned the sale of a business or a year in which income soared unexpectedly as “events” that might prompt someone to seek help from a pro.

“Sometimes you have to have some difficult conversations with people. They might have thought that they could retire in three years, but they really can’t do it. They’re either going to have to work longer, save more or a combination thereof. The No. 1 caveat for most people to retire is to be out of debt,” he said.

Grossman recalled working with one couple who had high net worth combined with a rather lavish lifestyle. Grossman said he told them they couldn’t continue their lifestyle in retirement unless they reduced spending dramatically.

“They said, ‘We kinda thought that. We just wanted to hear it from someone else,’” Grossman said.

Wealth Management: What to Look for When Choosing a Financial Advisor (4)

Based on the information provided, it seems that the article is discussing the importance of building trust and establishing a strong relationship between wealth managers and their clients. Wealth managers offer a range of services including financial planning, investment advice, retirement planning, estate planning, tax strategies, and more. The article emphasizes that while these services are important, the key factor in choosing a wealth manager is finding the right fit and establishing a level of trust and comfort with the advisor.

The article also mentions that wealth management services have evolved over time, with a shift towards comprehensive wealth management and a focus on providing advice rather than charging for transactions. The concept of fiduciary duty is highlighted, with several wealth managers mentioned in the article emphasizing that they operate as fiduciaries, meaning they are legally obligated to act in the best interest of their clients.

In terms of fees and investment minimums, the article mentions that most wealth managers work with clients who have at least $500,000 in their investment portfolio. Fees are typically set as a percentage of the overall portfolio and can range from around 0.5% to 1.5%. However, the article notes that fees and minimums can be negotiated, and some firms may offer reduced fees for family members of existing clients.

Life events such as job changes, births, divorces, inheritances, or conversations with professionals like CPAs or attorneys often trigger the need for financial advice and prompt individuals to seek the services of a wealth manager. The article also mentions that referrals from existing clients are a common way for new clients to find a wealth manager.

Overall, the article emphasizes the importance of trust, communication, and finding the right fit when choosing a wealth manager, as well as the evolving nature of wealth management services.

Wealth Management: What to Look for When Choosing a Financial Advisor (2024)


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