When dealing with finances, you want to take your time. That is why conducting research before hiring a wealth management service is critical. There are numerous services available, each claiming to be the best. How can you be certain that you’re making the right choice? Ask these seven questions when hiring a wealth management service to get the best possible option.
What Are Your Qualifications?
Ensure that the wealth management service you are considering is qualified to provide you with the required advice. Inquire about their education and work experience. Determine how long they’ve been in business. The more qualified they are, the more likely they will receive sound advice.
There are a variety of different certifications that wealth managers can have, and they can be confusing they include:
CPA: Certified Public Accountant
A CPA can help with your taxes and business accounting but not so much when it comes to investing.
CFA: Chartered Financial Analyst
A chartered financial analyst (CFA) has in-depth knowledge of asset management and securities analysis. It takes 1,000 hours of study, four years of professional experience, and a three-part exam to become a CFA. The pass rate for all three levels of the CFA exam is just 20%.
CFP: Certified Financial Planner
A CFP looks at their clients’ whole financial situation including needs for budgeting, retirement planning, life insurance, taxes, and estate planning. CFPs commit to a professional requirement to act as fiduciaries, meaning their financial advice must always put their customers’ best interests first. The CFP is a good candidate for people who want a comprehensive financial plan.
ChFC: Chartered Financial Consultant
A ChFC offers pretty much the same services as a CFP but a ChFC must take some additional coursework and rather than one comprehensive exam they must take a separate exam for each subject. ChFCs must also follow the fiduciary standard.
RIA: Registered Investment Advisor
Unlike the other certifications, RIA refers to a type of company, not a type of financial advisor. The registered part of the name comes from the fact that RIAs must register with the Securities and Exchange Commission (SEC) or a state regulatory agency.
IAR: Investment Adviser Representative
IARs work for the RIA company (see above) and are held to an even higher standard than just “fiduciary”. A fiduciary must limit their sales to “suitable” products but not necessarily the one with the lowest commission. An IAR can’t sell you a higher-commission product if a lower-commission one works just as well.
CFF: Certified Financial Fiduciary
The CFF certification means that the advisor upholds the highest moral, ethical, and fiduciary standards of service when providing investment advice to potential and existing clients. Yes, there’s more than one kind of fiduciary.
RICP: Retirement Income Certified Professional
The RICP specializes in retirement-related issues like when to take Social Security, 401k plans, Medicare, Life Insurance, etc.
CPWA: Certified Private Wealth Advisor
A CWPA serves more affluent clients focusing primarily on managing investments.
CLU: Chartered Life Underwriter
A CLU specializes in Life Insurance issues generally as part of an estate planning team.
For a more in-depth analysis of these various different certifications, see this Forbes Advisor article.
What Services Do You Offer?
Wealth management services can provide a wide range of services. Some only give financial advice, whereas others may offer full-service financial planning. Determine your requirements and ensure that the service you select can meet them.
What Are Your Fees?
Fees for different service providers can vary greatly. Some charge per hour, while others charge a flat fee or a percentage of assets managed. To avoid surprises later, ask about all costs upfront.
How Do You Get Paid?
The way a wealth management service is compensated can have a big impact on the advice they provide. Some may be fee-only, while others may be commission-based. Ensure you understand each work so you can consider it in your choice. As noted above, depending on their type of fiduciary responsibility, they may try to steer you toward higher-commission products if they are commission based.
What Is Your Investment Philosophy?
Understand the investment philosophy of the management service before you employ them. This will give you an idea of how they make decisions and what advice they will provide you. Check to see if it aligns with your own goals and values.
What Experience Do You Have With My Situation?
Not all wealth management services are the same. Some people may have more experience dealing with specific investments or financial situations than others. If you have a complicated situation, ensure the service you’re considering has the necessary experience.
Can I See Some References?
A wealth management service should provide you with references. Request a list of names and phone numbers of previous clients. This will give you insight into what others think of their services.
Asking these seven questions can help you hire the best wealth management service. With exemplary service, you can receive the advice and guidance you need to make sound financial decisions.
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