14 questions for your wealth manager

14 questions for your wealth manager

via Capital Canada | May 31, 2011

Let’s face it: talking to financial types isn’t always easy. Sometimes it can be a little difficult to understand exactly what they do, and how they intend to manage your money.

To that end, here are 14 questions business owners need to ask when they go shopping for a discretionary wealth manager and commentary from the experts on why asking these questions is important:


1. What types of clients do you have the most success with?

Business owners can be challenging clients. Ideally, you’re looking for an advisor who understands the owner mindset, and has had an established track record of working successfully with them in the past.

Brent W. Barrie, chief executive officer, SEAMARK Asset Management Ltd., Halifax: “Here’s a secret: many successful wealth managers are not, themselves, entrepreneurial. Others are. Many successful business owners built their wealth by taking risks, having confidence in themselves and their abilities, persevering through the tough times, and having a little luck along the way. Many wealth managers are not well equipped to deal with that type of personality.”

2. How broad is your experience?

University degrees and professional accreditation is good, but years (preferably decades) of on-the-ground experience matter too. Gauge how much of that experience is with business owners and their specific financial concerns. Knowing what you need from them before you meet is essential.

Sarah Bull, KJ Harrison & Partners Inc., Toronto: “You want someone who is qualified, understands the complexities associated with owning a business and can give you the help you need.”

3. How do you intend to work with my current team of advisors—my accountant, and estate lawyer, for example?

Because wealth management strategies are often developed in co-ordination with other financial or estate requirements, ensure your prospective choice can work well with other members of your financial team. And get details.

Olivia Woo, senior portfolio manager, Private Client Portfolio Management, Mawer Investment Management Ltd., Calgary: “Investment strategies sometimes are developed based on other financial or estate requirements. You don’t want your professional advisors (investment manager, accountant, and lawyer) all working in their own silos without knowing what the others are doing.”

4. How can you work my existing investments into your portfolio structure?

Rare is the day when a successful business owner brings a blank slate to an advisor: more likely, the owner has a portfolio of legacy assets that need to be sold or integrated into the new portfolio being built.

Jonathon D. Palfrey, senior vice-president, Private Clients & Foundations, Leith Wheeler Investment Counsel Ltd., Vancouver: “A manager that has some flexibility to manage a portfolio on a ‘segregated’ basis will be able to customize a better transition—[by] deferring capital gains, underweighting sectors because of concentration risk.”

5. How often can I expect to hear from you?

Communication is the key to a successful relationship. Ask how often the two of you will review your portfolio. What happens if you have questions between scheduled meetings?

Bull: “As a business owner, it is very important for the manager to have a holistic approach to your wealth. You need to understand how your investment, tax, insurance, estate and philanthropic planning will be coordinated and if they have professionals they can turn to for technical advice on these types of planning issues.”

7. How I am protected from fraud?

The wealth manager’s firm should have a well-established system of checks and balances (compliance procedures, privacy controls, third-party audit and custodianship of client assets, etc.) that ensure your portfolio is always secure from thieves and cons.

Joe De Giorgio, vice-president & investment counsellor, T.E. Wealth, Montréal: “With all the recent financial scandals, the subject of custody has become increasingly important.  You want to find a firm that utilizes third-party independent custodians. This means that your assets are not held with the manager directly. If something were to happen to your manager, your assets would be secure.”

8. Exactly how do you make money?

Any professional should be prepared to give a clear, unambiguous answer about the firm’s compensation—fees, commissions, assets under management. Remember to ask about incremental, deferred, or otherwise hidden fees baked into investments as well.

Palfrey: “Ideal answer: below the median for a similar mandate, clearly expressed and collected in the most tax advantageous manner, with family accounts combined because fees typically reduce as the portfolio increases.”

9. How does the ownership structure at your firm work?

Is the firm independently owned, or part of a larger institution? Will you be working with an employee, or someone with skin in the game: an owner or partner who understands the risks and challenges that come with owning a business and who has a vested interest in ensuring you are completely satisfied with both the service and the performance?

Palfrey: “[You want] a firm [with] a proven track record and strong reputation, and an ownership structure that aligns the interest of both clients and employees. [Business owners] likely identify with the benefits of a private or employee-owned firm.”


10. What’s your investment style? Have you always invested this way?

It’s easy to throw around labels like growth, value, momentum, and so on. But what do these actually mean? Ask about the rules your prospective investment manager follows when buying or selling? Can he or she clearly articulate the philosophy guiding his or her investment decisions?

Bull: “Often investment professionals will discuss their philosophy in terminology that is not familiar to professionals outside of the business. This makes it difficult to truly determine what drives their investment decisions. What does a growth or value oriented approach really mean? Does that approach coincide to your knowledge and experience as a business owner?”

11. How do you minimize risk for clients?

There’s plenty of risk in owning a business. That’s why most business owners look to their portfolio managers to minimize investment risk. Ask about the systems and processes followed to mitigate economic, market, and stock-specific risk within client portfolios.

De Giorgio: You want to be sure that you are dealing with a manager that has been through different market cycles.  It’s important to know that your money is being taken care of not only in good times but also in bad times.

12. Why should I diversify outside of my business?

Most entrepreneurs became rich by concentrating their wealth—reinvesting in their businesses and building them over time. Once an owner moves from wealth building to wealth preservation, diversification is usually the more prudent strategy. You’ll want to know how your prospective financial manager plans to diversify your assets.

Bull: “As a business owner, you want to get an understanding of how the investment manager is going to consider your business in the design of your investment portfolio. Advisors understand the risk of a concentrated asset but often don’t include the business in the asset allocation strategy.”

13. What kinds of returns have you delivered?

Wealth management is ultimately a pay-for-performance business. Don’t pay for mediocrity. If there is excellence to be found, there should be evidence of it in the portfolios your advisor or manager has constructed for clients.

Palfrey: “Are the performance results compliant with the CFA Global Investment Performance Standards? Audited? Relevant to my situation? Available on an annual and annualized basis? The ideal answer: yes.”

14. How are you investing your money?

Is there an alignment between you and your advisor: is a significant portion of the portfolio manager’s wealth invested the same way he or she recommends for you? While alignment doesn’t necessarily guarantee outperformance, it certainly ensures your advisor or manager is committed and engaged to your portfolio.

Woo: “You should know where your investment manager put his own money.  Does the manager ‘eat his own cooking’ by investing alongside with his clients?  Are there rules in place to prevent a manager from front-running his own clients?”


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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

2 replies
  1. Bree Ward says:

    It’s true that talking financial details can be confusing and difficult at times. It’s a good thing that you provided pertinent questions that clients must ask their wealth manager. All the questions rooted in background digging, credibility, and reputation of the financial adviser. If ever that I will get the chance to get a wealth manager, I will definitely follow your tips in checking his/her background. Thanks!

  2. Jenna Hunter says:

    It was really interesting to learn about the fourteen questions for your wealth manager. My cousin is thinking about getting a wealth manager. Getting a professional to help him would be really nice.


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