5 Tips for Choosing a Wealth Management Firm

Wealth management firms are all different, with their own specializations and services. As a result, the process for choosing a wealth manager is a very personal one. Wealth managers work closely together with their clients to identify financial goals and map out a plan for achieving them that’s built around choosing solid investments that’ll grow over time. If you’re ready to build wealth, there are a number of guidelines you should follow for choosing a firm. You can also use SmartAsset’s free matching tool to help you find financial advisors who serve your area.

What a Wealth Management Firm Does

Wealth management is perhaps the most comprehensive financial service you can take advantage of. That’s because it’s holistic in nature, meaning all of your financial needs, goals and circumstances will be taken into account. This level of personalization is rare, which is why some firms may not even offer full wealth management.

If you subscribe to wealth management services, here are a few offerings you might come across:

Net worth determination
Estate plan creation
Retirement income planning
Education fund planning
Trust planning
Tax management and minimization
Investment management
Insurance planning
Risk management

Of course, to get this type of attention you’ll likely need to pay somewhat pricey fees. However, for many people this is still worth it, as handling all of these needs on your own can be quite difficult.

Choosing a Wealth Management Firm to Work With

If you sign on with a wealth management firm, it will be one of the most important financial decisions you’ll ever make. In turn, it should be treated with a strong attention to detail. After all, you’ll be paying fees to a firm for this level of treatment.

Just like any financial decisions, there are a number of factors to be aware of and important questions to ask. Below are some good guidelines to follow when you’re picking an individual wealth manager or a wealth management firm to hand your money over to.

Tip #1: Get a Feel for Each Firm’s Ideal Client

In general, wealth management firms cater to investors who have a sizable asset base, but they don’t all take the same approach. Some wealth managers may prefer to work with clients who have between $50,000 and $500,000 in assets, while others might exclusively target millionaires. Asking a wealth manager about the kinds of clients the company works with can give you a sense of where their expertise lies and whether that coincides with what you’re looking for.

Tip #2: Compare the Services at Each Firm

If you’re on the hunt for a wealth manager, you may already have a clear idea of what you need them to help you with. If that’s not the case, it’s important to consider what kinds of products and services different firms offer. Does your wealth manager only offer investing advice or does the firm also assist with things like taxes or estate planning? Some firms may specialize in certain types of investments or strategies. For instance, some firms focus exclusively on real estate investments, while others prefer stock-picking.

It’s also a good idea to pay close attention to the firm’s overall investment strategy to make sure it aligns with your goals. If you’re considering several different firms and they’re all offering the same cookie-cutter portfolio options, that’s a sign that you may need to look elsewhere.

Tip #3: Review Each Firm’s Fee and Commission Schedule

A financial advisor discussing a portfolio with a client.

Wealth managers can help you increase your wealth but they don’t work for free. There are two basic ways that wealth managers earn money: by charging commissions on the products they sell or assigning fees to specific services. If you’re not looking to get a sales pitch every time you meet with your wealth manager, a fee-only advisor may be the best choice.

When it comes to cost, the most important thing to consider is the amount of value you’ll get for what you pay. If you’re spending a large percentage of your earnings on fees, it’s a good idea to be sure that your portfolio’s performance is worth the extra expense.

Tip #4: Ask About Each Firm’s Client-Advisor Availability

While you probably don’t need to speak to your wealth manager on a daily basis, you might need to be in touch with them regularly. Asking how often they meet with their clients and how they prefer to communicate is important to ensure that you’re both on the same page. If you have concerns about a particular investment or a question about a fee, you don’t want to be scrambling.

Tip #5: Read Through Each Firm’s SEC Records and Brochure

Wealth management firms can have millions or even billions of dollars in assets under management, but that alone isn’t an indicator of how well they serve their clients. If you’ve zeroed in on a handful of firms, consider their past history. For instance, has the firm received any special recognition or awards? Can you find positive reviews through the Better Business Bureau or another consumer site?

Digging into a firm’s background may take a little time but it can be worth the time and extra effort if you’re on a mission to build wealth in your 20s and 30s or before you reach retirement age.

What to Avoid When Choosing a Wealth Management Firm

Choosing a wealth management firm is an important financial decision. Here are five common mistakes you should avoid when picking a firm to support your financial growth:

Mistake #1: Choosing based only on cost. Low fees can seem attractive, but focusing solely on cost can lead you to overlook critical factors like expertise, personalized service and track record. A cheaper wealth manager may not provide the level of attention and strategy needed to meet your long-term goals.
Mistake #2: Ignoring the firm’s fiduciary status. Not all wealth managers act as fiduciaries, meaning they may not be legally required to put your best interests first. Always clarify whether your wealth manager has a fiduciary duty, as this could offer you greater transparency and accountability.
Mistake #3: Skipping the background check. Overlooking a firm’s regulatory record or history of client complaints could expose you to unnecessary risk. Always review the firm’s Form ADV filed with the SEC, and check for past disciplinary actions or negative client reviews.
Mistake #4: Forgetting to discuss conflicts of interest. Some wealth managers earn commissions on financial products they recommend, creating potential conflicts of interest. Ask how your advisor is compensated to determine whether their recommendations genuinely align with your goals.
Mistake #5: Not clarifying communication and availability. Misaligned expectations about how frequently you’ll communicate can lead to frustration. Confirm upfront how often you’ll meet, your preferred communication methods, and whether you’ll have direct access to your advisor.

Bottom Line

A financial advisor reviewing a portfolio with clients.

Working with a wealth manager is all about forming a relationship with someone who has a fiduciary duty to you and cares about your money as much as you do. Choosing the wrong person for the job has the potential to be disastrous, not only for you but for the next generation if you’re planning to pass wealth on to your heirs. Using our tips as a framework can make it easier to find a firm that’ll have your best interests in mind.

Tips on Finding a Financial Advisor

If you want help managing your financial plan and investments, a financial advisor can help. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When you meet with a financial advisor, make sure you are asking the right questions. This will enable you to ensure that whichever advisor you choose is fully the right match for you.