7 questions to select a wealth manager

June 29, 2021 – Written by Michael Winstanley

Many individuals are daunted by the task of selecting a wealth manager and it can be hard to know where to start.  As they say, time is money, and every month that goes by when your savings are not properly invested will hit your eventual retirement pot. 

Getting started on the journey can be very difficult; there are so many advisers to choose from, many claiming to be right for you. However, unless you’ve had previous experience with a wealth manager or have been referred by one of their existing clients, you’re not likely to know how to start comparing one from the other. 

Costs vary from adviser to adviser; some pieces of advice have high upfront costs, whereas others have hefty ongoing costs (and some seem to have both!). Because of this, it can be hard to start a trusting relationship and there is the risk of disengagement before it’s even started.  

We’ve come up with 7 questions you can ask a wealth manager that can help you get started.

Here are the 7 key questions you should ask yourself when considering employing a wealth manager.

  1. What is their minimum client account size?
  2. What services are offered?
  3. What is their service approach?
  4. What is their investment approach?
  5. What about custody and compliance?
  6. What are their fees?
  7. What makes them unique and a good fit for you?
  1. What is their minimum client account size?

There is still a perception in many quarters that financial advice and wealth management are only for the extremely wealthy. Now, while it’s true that you do need some assets for wealth management to be relevant, and some wealth managers do set minimum client account sizes, these might not be as high as you’d think.  

Different firms have a service offering appropriate to different types of client and its important to find an advisor whose service is appropriate to your level of wealth and desire for personal planning.

At one end of the market, you have so-called robo-advisors who provide mass market advice using call centre type approaches.  At the other end, you have highly specific services for the ultra-high net worth globetrotting set.

For the majority of moderately successful professionals, or business owners, there is a range of firms offering varying levels of service to clients with varying levels of wealth and life stages.

For example, Tideway, who specialise in at-or-near retirement planning, usually advise individuals who have already built up a fair chunk of their savings and are now looking for prudent management and growth of that pot. As a result, we tend to speak with individuals who have at least £250,000 of manageable assets across pensions, ISAs and other investments. 

  1. What services are offered?

As mentioned, different wealth managers offer different services.  But rest assured that whatever your needs, you should be able to find a wealth manager that suits them. 

If you’re looking for help planning your retirement, accumulating assets tax efficiently or estate planning, you should be able to find an adviser with both expertise and experience in that area. The key is in simply asking what they specialise in and also if they have any specific qualifications that back that up.

Tideway specialise in helping clients save tax efficiently towards retirement.  We then help clients move into the draw down phase, making use of the various tax allowances available and monitoring this on an annual basis. If you’d like to know more about how we do this, see one of our previous articles here or feel free to start using one of our retirement calculators.

  1. What is their service approach?

Before you start researching, you should decide how you would like to receive advice and how often you’d want to speak with an adviser. 

Some people want a fairly active role and to have lengthy in-person meetings with their wealth manager, whereas others want to hear as little as possible from them, so long as they are taking care of business.

Perhaps you are very busy, and prefer a highly functional relationship where you can email late at night or speak on Zoom at a time convenient to you. Some people prefer to keep track of affairs using an app whereas others prefer a more traditional quarterly or bi-annual report.

Be aware that the more active you are, and the more face time you require, the more costly the service will tend to be.  Those plush London offices need to be paid for somehow! 

Tideway’s philosophy is that everyone is different, and advice needs to be tailored to the individual – each client must have their own personal wealth manager. But we eschew expensive offices and client entertainment, preferring to focus our energy on the advice and investment performance of our clients’ funds.  Ultimately we aim to provide a good personalised service in a price competitive way.

  1. What is their investment approach? 

Investment approaches differ between wealth managers; some offer in-house management, either where they have discretion over how to invest funds or by seeking your agreement before actioning. Others simply invest clients in a single fund managed, for example, by a large insurer, or by outsourcing the investments to a third party, who themselves will have their own fees. 

There is no right or wrong way for how firms manage investments, but it is important to ask questions so that you can understand what you will actually get for your money. Simply investing a client in one single fund may certainly reduce costs, but if that’s the case how much extra value is your wealth manager adding to justify the fees that they are charging? Conversely, if your wealth manager outsources portfolio management to a third party, in this case causing fees to rise, again what is the wealth manager doing to justify their own ongoing fees?

Tideway’s investment approach is to carefully construct a range of 12 “model portfolios” designed to deliver specific risk and return characteristics. These portfolios are composed of funds we have researched and whose managers we have confidence in. Client funds are invested across 12 portfolios according to their risk attitude and investment time horizon.  To read more about how we invest, please see our investment guide here or speak to an adviser.

  1. What about custody and compliance?

One area that often gets overlooked, but is of importance, is who actually holds your funds and investments. This is termed custody.

Your wealth manager will rarely take custody of your investments.  They will likely work with one or more partner firm with a strong fiduciary backgrounds, and who will actually hold your investments, and create wrapper accounts such as pensions and ISAs.  This means that even should your wealth manage suffer some business problem (and remember many wealth managers are small companies), your funds will remain safely held by this fiduciary partner. 

Many of these fiduciary partner companies are life and insurance providers who offer modern IT platforms, which can give you online access via websites and apps. They will levy a charge to your wealth manager for providing this service.

Ensure that you ask what the ‘SIPP provider’ or ‘ISA provider’ will be, and do your research on that company, as well as the wealth manager.

Additionally, ask your wealth manager about their compliance function and check their FCA authorisation in the FCA register to ensure it matches their website, and senior managers.  Most good firms should have an in house compliance manager, whose main role is to ensure that the internal processes of the firm are robust, and staff are well trained.  Some smaller firms may operate as an “appointed representative” of another firm, which essentially means they are using the other firm as an umbrella organisation in respect of compliance and FCA registration.  Whilst this may not necessarily be bad news, it may indicate a lack of in house compliance capability.

  1. What are their fees like? How does this compare in the market? 

The total fees involved will vary between different wealth managers. There are usually three key charges:

  • Wealth Management – This may include an initial advice fee (as there is often some initial work in getting your advice and accounts set up properly) as well as ongoing advice and portfolio management charges.
  • Custody – Which will be the annual custody/ platform provider’s charge.
  • Investment – If your wealth manager uses external fund investment managers to manage your funds, these funds will have charges which are ultimately paid by the client

There can be other charges, such as outsourced portfolio management, dealing commissions and exit penalties. These fees can be fixed, hourly or as a percentage of the assets involved. 

It is not uncommon to see annual charges go as high as 2.5% – 2.7% p.a. However, the higher the charge means the greater return an adviser has to make in order to reach their targets, which could lead to excessive risk taking.

At Tideway, we wrap our advice fees and custody fees into a simple charge of 1% per annum of funds managed. Any investment fees levied by fund managers employed by the funds we invest into are deducted prior to those funds returns, and range from 0.2% per annum to 1% per annum.   

Whilst its not always easy due to the different pricing methods of different wealth managers, the level of fees can impact performance significantly, and its a good idea to compare fees for custody, advice and investment across all the wealth managers you may be considering, and for the size of fund you are considering allocating them.

  1. What makes the firm unique and is this relevant to your needs?

Finally, it’s important to find the right adviser to match what you’re trying to accomplish. 

Some firms are specialists in some segments of the market, but weak across others.  other firms are very generalist, but won’t have the capability to offer some of the more sophisticated tax planning or inheritance planning services you may require.

Also, beware of claims of excessively strong investment performance.  It is notoriously difficult to consistently beat the market in terms of returns, and today’s star fund manager can easily be tomorrows dog manager.

If your approach is more towards avoiding excessive risk, but looking for reasonable returns after fees, concentrate your search on firms with strong investment approaches across the whole range of investment opportunities, rather than firms who are pushing a particular class of investment product. 

Do make sure to ask your prospective wealth managers to evidence how they can align your needs to their services. 

In terms of service and “fit” you should get a feel for the approach of each firm after one or two meetings with them, and if it doesn’t feel comfortable at the outset, move on. Its likely to be a long term relationship and you want to enjoy it.

Conclusion 

Selecting a wealth manager is not an easy task and does require some effort and focus.  But when you find the right firm, a lot of worries can be lifted, so it’s worth persevering.

Ensure that you have an idea beforehand about what services are most important to you and what you’re trying to accomplish. Try to write them down in a “tender document” so that you can score each firm you meet against consistent criteria.

If you don’t know enough at the outset to write the “tender”, meet with one or two firms first, then write down your criteria and proceed from there.

Ensure that you ask questions throughout and check the company’s website for resources. 

If you would like to learn more about how Tideway Wealth can help you, please feel free to get in touch with one of our advisers and test the questions out!