Wealth manager speed dating - five questions to ask

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Choosing a wealth manager is more akin to speed-dating than, for example, to buying insurance online or over the phone. A potential client is looking for a suitable long-term partner to trust and provide security, rather than a salesperson to sell them a simple financial product.

Few would hand over a significant proportion of their assets to a wealth manager without having a face-to-face meeting first. However, first impressions only go so far, so asking the right questions at that point is essential.

HOW CAN YOU ENABLE ME TO REACH MY FINANCIAL GOALS?

A good wealth manager should be able to back up their plans to meet your financial objectives and appetite for risk with facts and figures, without confusing you.

A key consideration is whether the strategy seems well-tailored to your circumstances or appears to be a one-size-fits-all approach. In addition, make sure you are getting a clear idea of the investment process. Never be afraid to ask if anything is unclear.

HOW HAS YOUR INVESTMENT PERFORMANCE BEEN HISTORICALLY?

Of course, past performance cannot be relied on as a guide to future performance, but good wealth managers should be able to demonstrate a decent track record.

To drill down further, find out if they have any clients with similar profiles to yours and ask about how their investments have fared in recent years. This is especially important if your financial affairs are relatively complex, or if you have specific needs.

Ideally, wealth managers will be able to demonstrate gains that exceed general rises in the market or a benchmark index such as the FTSE 100. After all, this is what you pay for. They should be able to show that they are worth their salt.

HOW WELL DO YOU COPE WITH SHOCKS IN THE MARKET?

It is a good idea to understand how wealth managers prepare for market turmoil. Find out how they dealt with the turbulence caused by last June's vote on the EU referendum, for example.

First and foremost, it is a wealth manager's job to protect your assets, come rain or shine. Talk about any dips in performance. Ups and downs are perfectly natural.

A wealth manager should be able to explain performance peaks and troughs clearly and concisely. Do not put up with vague or evasive answers.

WHAT WILL I HAVE TO PAY?

Wealth managers have to make their charges clear and understandable. That said, fees can vary greatly according to the manager's style and the number of transactions carried out on a client's behalf.

Expect to pay an annual charge of between 0.5 and 1 per cent of total assets under management, usually quoted exclusive of VAT at 20 per cent.

Additionally, clients may have to pay for the investment funds the wealth manager buys, set-up costs for Isas and the collection of interest and dividends. Transaction costs are not always included in annual management fees either, so ask for clarity at the outset.

The wealth management charge is not set in stone, so negotiate to get the best deal. The larger your portfolio, the more bargaining power you have.

Additional fees can also impact performance, so find out what similar clients are charged annually. That will give you a better idea of what you're likely to pay.

WHO ARE MY CONTACTS?

An investment manager will be responsible for your portfolio, but you may only rarely speak to them. Wealth management firms often employ relationship managers to be a client's first point of contact.

These are often skilled personnel who should be able to communicate decisions to you and be available if you have a query.

Find out who you can speak to if your first or second point of contact is unavailable. Understanding the chain of command is a good idea in case you have an urgent query or a complaint.

HAPPILY EVER AFTER

Selecting the right wealth manager is an important decision. A bad choice could mean a strained relationship, disappointing investment performance and the necessity of searching for a replacement.

Conversely, getting it right first time should mean protection for your assets in good times and bad, in sickness and in health - and definitely for richer, rather than poorer.

Lee Goggin is the co-founder of the website findawealthmanager.com.


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