Selecting a financial advisor or wealth manager can be a difficult task. Your financial situation is complex and trusting someone with your money is trusting someone with your future. That is not a job we take lightly. Ultimately, mutual trust is the key to a successful relationship between you and your advisor. It is important that your financial advisor truly knows your life, your family, your goals and anything else that makes you, you.

Financial Advisor, Financial Planner, or Wealth Manager? Which financial professional do you need?

There are a few different titles that those in the financial industry traditionally market themselves under: financial advisor, financial planner, or wealth manager. While many financial professionals have a clear idea of what differentiates these three, the distinction has often been considered murky for consumers.

In theory, a financial advisor offers investment management with a focus on the markets and securities. A financial planner manages your investments while also providing you with a broader financial plan to help you reach your goals, whether that be retirement, buying your first home, paying for college, etc. So a financial planner could serve as a financial advisor, but an advisor would not serve as a planner.

Then there are wealth managers who typically look at the big picture and provide a holistic approach to your finances. Wealth managers often provide investment management and financial planning in addition to tax reduction strategies, estate planning, insurance, and risk reduction, among other things. So a wealth manager could serve as a financial advisor and a financial planner, but not the other way around.

To top it all off, the title wealth advisor is also used to describe a professional who, in theory, provides the same holistic approach as a wealth manager and only differs in name. 

“And this mess is so big, And so deep and so tall, We cannot pick it up. There is no way at all!” by Suess, The Cat in the Hat

Now, the key word used here is ‘in theory.’ On paper this all looks good and works but sadly, like a Dr. Suess book, it does not translate so easy to the real world. Due to a lack of regulation, all of these distinctions are no longer as simple and concrete as they once were.

A Rose By Any Other Name

The financial industry has turned the different professional titles into nothing more than a marketing tool, making it even more complex and confusing for you, the consumer. So you will find many financial advisors who do in fact provide planning and financial planners who provide a holistic approach.  With the exception of industry certifications like a CERTIFIED FINANCIAL PLANNER^TM (CFP^®) or a Certified Private Wealth Advisor (CPWA) (more information on industry designations can be found here), titles generally will not help you narrow down your list of financial professionals.

What is important to consider when choosing a financial professional?

Fees Charged And What They Include

The two most important factors, outside of the basic question of do you trust the person, is how much the financial professional charges and what the charges cover. This is important because you want to make sure you are comparing apples to apples.

Just like the different professional titles, the fees and how they are charged have become major marketing tools in the financial industry. There are many hidden fees in our industry. There is also the ‘fee trap,’ which consumers can sometimes fall victim to: focusing solely on who has the lowest fees with little regard to service and performance. Is it better to have a lower fee if it also means a lower return and poor service?

We recommend asking a potential advisor to explain all fees and what exactly they cover. A 1% fee for managing your money is not the same as a 1% fee to manage your money in addition to providing holistic wealth management services.  Knowing what fees are charged and what the fees include are the first and most important step when considering and comparing new financial professionals.

Services

The next best thing to consider would be services offered by the professional and his or her firm. Unless you are solely seeking investment management, in which case we recommend you find an advisor who specializes and primarily focuses on such service, we recommend you find a wealth manager or wealth advisor that offers a holistic or comprehensive approach to your finances. You can benefit from such an approach by working with a wealth advisor to coordinate and unify the decisions in your life, so that those decisions complement each other and work to produce enhanced results.

Read more about What A Holistic Financial Advisor Can Do For You.

Considerations Before Interviewing Financial Advisors

Below you will find important considerations and questions to assist you in finding a financial advisor best-suited to your needs. As in most cases, there are some “red flags” to be aware of when speaking with a financial advisor. These red flags do not necessarily mean that the financial advisor is unqualified or lacks integrity, but will help you determine if your goals are going to be the priority.

Questions:

• Do you provide a comprehensive written analysis and personalized plan to address my financial situation? In addition, do you offer assistance with the implementation of this plan and continuous, on-going advice regarding my financial affairs, including advice on non-investment related financial issues? Financial professionals provide a range of services and it is important to match your needs with the services provided.
• Do you provide a holistic/comprehensive approach to wealth management that includes all of the following services: Goal Setting, Budgeting, Tax Planning, Estate Planning, Insurance Needs, Education Funding, Retirement Planning, as well as Investment Planning, Management, and Review? And/or more?
• How is your firm compensated and how is your compensation calculated? Remember to compare apples to apples, be aware of hidden fees, and try to avoid falling victim to the ‘fee trap.’
• Will I work directly with you or an associate of yours? In addition, how often do you meet with clients to review their situation and financial plan? As your life and assets change so should your financial plan. Regularly scheduled reviews with your financial advisor help keep you connected and on track to reach your goals.
• Do you have proprietary products and investments within the firm you work for? Avoiding proprietary products can help eliminate any conflict of interest and ensure the advisor is truly acting in your best interest.

Red flags:

• The financial advisor tries to sell you an investment/or product in your first meeting. We believe your goals are the priority and a detailed financial plan is required in order to ensure we have a strategy that gives us the best chance at reaching those goals. Recommending an investment prior to knowing what investment objective is needed in order to reach your goals is hardly prudent wealth management.
• The financial advisor is primarily an insurance salesman pushing annuities. Annuities can be an effective means to reaching your goals; however, rarely is it in the client’s best interest to have a significant portion of their assets in annuities.
• The advisor pushes one investment or product as a “must-have” in your portfolio. There is no one single investment that fits every person and every portfolio. As mentioned before, it is essential for a financial advisor to build your portfolio around your goals and investment objectives. Your portfolio should be unique, just like you and your situation.
• The advisor will not tell you how much he or she earns in commissions or fees from an investment. Moreover, if the advisor tells you “the insurance or product company pays them”, it is a big red flag and the broker is not being transparent. Ultimately you pay the commission either by an upfront commission or less return because the company pays the broker. Transparency is key to building a trusting relationship.

Meet With Our Advisors Today

At Virtus Wealth Management, we are an independent, fiduciary (in advisory relationships) wealth management firm located in Southlake, Texas. Our goal is to help you get from where you are today to where you want to be in the future, but we believe this can only be accomplished through mutual participation and limiting our clientele to those willing to be involved in the process. We want you to feel educated, empowered, and involved in the planning of your financial future.

If you are seeking a financial advisor, we want to invite you in to our office for a complimentary consultation so you have the opportunity to get a better understanding of who we are and what we can do to help you and your specific situation.

We also provide more information in our Virtus View – a newsletter we send via email twice each month. For the latest investment insights, tips, and strategies to help you live your best financial life, you can sign up to receive this newsletter at the bottom of this page. In addition, past Virtus View articles can be read here on our blog.

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