PAM Guide to Wealth Management

Choosing somebody to manage your money

Before constructing a financial plan you need to choose a private wealth adviser. This choice may be subjective, as a crucial part of the decision is the chemistry between you and your adviser.

Most importantly, you have to be able to trust the adviser. This trust will be gained in a number of ways. First, it is through the qualifications and the level of experience of the adviser. It is important you choose a professional who is qualified to provide you with the necessary advice to the highest standard possible.

Second, you may receive reassurance if an adviser is recommended by a member of your family or by a friend, although this is not a guarantee of success, as the people who recommend someone to you may not have the required expertise. Equally, you tend to end up with one adviser to go to, rather than a pool of potential candidates.

The way in which advisers work varies, so you need to understand more about them before making a final choice. The differentials include:

1) The level of service required

When wealth managers talk about providing a personal service, this means different things to different people. Try to establish the level of service an adviser will provide, how frequently they will review your financial plan and how many meetings will be face-to-face rather than online or by phone.

Check they will provide you with a comprehensive service and not simply try to sell you financial products. Establish the systems and processes they will use and whether they will implement the recommendations themselves. Ask about the level and frequency of reports and information you will be provided with by them. This is important to you understanding the progress you are making in achieving your objectives and whether you need to review your financial plan.

2) Check the qualifications of the adviser before you start

Ensure they are sufficiently qualified and experienced to advise you on achieving your financial plan. Ask what was involved in gaining these qualifications. Obviously, the more complex your structuring requirements, the greater the qualifications and experience your private wealth adviser will need. Check the resources available within the firm. See if they have experts in different areas, such as pensions, investment and tax planning. No one individual is an expert in all areas of wealth management. Ask them which other professionals they will consult for certain parts of your financial affairs.

3) See if you can ask other clients to verify the service they have received

Even if an adviser is recommended, it is advisable to go through all the other steps to check they are appropriate for your requirements.

4) Check the longevity of advisers at the wealth manager

An adviser will gain a knowledge of not only your financial objectives and wealth but also your risk profile over time. They will achieve an insight that is not possible simply by reading a file of notes on your financial affairs. If your adviser changes every year, the new manager will have to build this insight virtually from scratch. The stability of advisers and other employees at the wealth manager will provide an indication of the character of the institution. Some IFAs and private banks, for example, have suffered from many advisers and private bankers leaving on a frequent basis. You need to avoid firms with revolving doors.

5) The range of products and services offered

Does the adviser have access to all products/structures from all providers in the market and therefore is he truly independent? Does the adviser have a bias to a few providers, or is he restricted even to only one provider?

6) Is the adviser a "one-stop shop" or does it use a group of specialists?

Some wealth managers have tried to build in-house specialisations in all areas of wealth management, including tax planning, investments and estate planning. There is no one right approach. While some people prefer just to deal with one adviser they trust, others would rather use a range of specialists, so they obtain €œbest of breed" from each one and do not place all their eggs in one basket. If an adviser is part of an organisation that manufactures products, such as investment funds, ensure there will be no potential bias to this provider and therefore a possible conflict of interest.

7) Review the size and financial strength of the firm

This is a subjective choice, as there are advantages and disadvantages in using boutique firms or large institutions. Among these is the perceived comfort a large institution can provide in terms of financial strength and depth and breadth of expertise. While boutique firms may not have the financial strengths and service range of global private banks, the level of personal service may be higher. Whichever you choose, the most important factor is whether the service meets your requirements.

8) Check that the individual you meet will act as your adviser

If this is not the case then ask to have a meeting with your prospective adviser before agreeing to use the institution.

9) Establish what the charges are and how these will be levied

If the adviser charges fees, establish what these are. Is this on an hourly basis and which activities are chargeable? Is it every conversation, measurable advice, transactions, or all of these? You may be given a choice over how you pay. This should be documented before the wealth manager starts providing advice. Charges will vary from one firm to another.

This will depend on the size of the institution, the seniority, qualifications and experience of the private wealth adviser, the level of service they provide, their location and your requirements. London-based firms generally charge more than those based elsewhere in the UK, because their costs are generally higher. Many firms will provide an initial interview for no charge. This meeting will be used to determine if you want to appoint the adviser and whether they can assist you in achieving your objectives.

10) What is the adviser's international expertise

Children frequently study and work abroad, or marry foreign nationals. Millions now also buy properties overseas. These give rise to tax planning and wealth structuring issues. It is important to ensure that your adviser has the expertise to handle overseas planning, or has associations with professionals who can deal with these issues and have knowledge of tax regimes around the world, if you need this.

11) You must trust who you choose

Trust is an instinctive evaluation and will become apparent as you talk to the adviser. Check with the UK financial services regulator, the Financial Conduct Authority (FCA), at whether the adviser or their firm has ever been disciplined, or fined in the past. Even if you trust the adviser and firm completely, it is still essential to receive written confirmation of any agreements you make, such as the services you will be provided and how much these will cost.

Once you have chosen somebody to manage your liquid assets, there are six core steps that will comprise the wealth management process. These are:

  • Identify goals and objectives.
  • Collect and analyse personal and financial information. This includes evaluating your attitude to risk.
  • Processing and analysing the information.
  • Producing the financial plan based on this information.
  • Implementing the plan.
  • Reviewing the progress of the plan and making alterations.

These six steps are analysed in detail in chapter three.

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