What are some important questions I should ask private wealth managers who are courting my business? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world.
1. What value-add services do you offer?
The best edge a good wealth management firm has is not "beating the market," it's setting up the structures to accomplish your goals. You wouldn't believe what can be accomplished with efficient corporate, tax, insurance, and trust structures -- and I'm not talking about aggressive/evil stuff, I'm talking about what's really and truly there in the tax code and various IRS guidance/decisions. Be efficient with your taxes, protect your assets, hedge against various personal and business risks, lock in and expand the core value of your business, and transfer in and out of businesses you start with efficiency and confidence.
2. What's your investment strategy?
If the answer isn't basically "We'll get you the S&P plus or minus a small percentage, and have good hedging/diversification to protect against some of the downside," be wary. The next Buffett or Icahn is out there, but the odds that you'll know him when you see him are nil. The rest of the guys who have some (ostensibly) brilliant strategy are going to fail. (And you could just buy BRK.B or IEP in a Scottrade account if you feel like you have to participate in a rockstar's fund.)
3. What special relationships do you have?
If you're going to pay xx basis points, you want blue-chip access. Can they get you in with firms that have track records going back decades? If you decide you want to pay some percentage of your money into really aggressive strategies, can they connect you with PE funds with a good track record? What if you decide you want to do some real estate deals or pick up some distressed assets when a certain sector is really depressed -- can they make that happen? Do they have a strong network of CPAs, attorneys, and other advisors? Et cetera.
4. How do I track my account?
You'll want to know how often they will review your account performance and projections with you, and have a sense of what the reporting capabilities are. You need an actual person who really understands your portfolio inside and out to explain things to you, or it might have been better just to buy plain-vanilla ETFs through an online brokerage. You need to see what that reporting will look like, so that you get the information that's important to you.
Ask them: What is your history? Will anyone vouch for you? You do not want a fly-by-night organization to run off to a non-extradition country with your money. The more reputable third-party organizations are involved in handling the assets, the more confidence you've got. (This doesn't mean you can only go with a bulge-bracket bank; some of them charge more fees than they earn, and make really terrible investment decisions.) If at some point you hear the word "fiduciary," that is also an important sign. You want to know that they are somehow obligated to what they actually think is good for you, not just to do something that is "suitable" for you and "high-commission" for them.
Disclaimer: This post is offered for general informational purposes only and should not be considered professional advice or recommendation. I encourage you to retain licensed/registered legal, tax, and investment advice as appropriate. This should not be considered an advertisement or solicitation in any way.
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