Financial Advisory Firms: Why You Need Them?

For investors with liquid assets worth between $5 million and $500 million, firms like Pillar Wealth Management could be the right choice. Our deep expertise and decades of experience can help investors live a life of financial serenity. Schedule a free chat with us, and we’ll explain how we can help you live the way you want.

However, it’s natural to have a few questions as a new investor. In this article, we hope to answer some of the most common questions we get:

-What are financial advisory firms?

-Why avoid bank financial advisory firms?

-How do I choose a financial advisory firm?

-Who are the best financial advisory firms?

-Why do millionaires hire financial advisory firms?

If you’re confused about any of these topics, we suggest you keep reading!

Table of Contents
What are Financial Advisory Firms? Why Avoid Bank Financial Advisory Firms? Why do Millionaires Hire Financial Advisory Firms? How Do I Choose a Financial Advisory Firm? Conclusion

What are Financial Advisory Firms?

“Financial advisory firms” is a broad term to describe organizations that provide:

-Financial advisory

-Financial planning

-Investment management

-A combination of all the aforementioned services

Financial advisory firms can be independent entities or a part of other financial institutions like banks. There can often be a difference in the quality of services provided by independent financial advisors and those who are part of larger banks. For example, private banking divisions often provide the same services (on the surface) as independent wealth management firms. However, a closer look often reveals a wide gulf between the two advisor types. Our ultimate guide on financial advisors provides further details on the nuances of these services.

Why Avoid Bank Financial Advisory Firms?

As we just discussed, there can often be a difference between the services of independent financial advisory firms and their banking counterparts. But why avoid bank financial advisory firms? Do they not have the right expertise to help high net worth and ultra-high net worth individuals? Let’s find out. To make things easier, we’ll compare private banking divisions of banks with wealth management firms.

Bank Financial Advisory Firms Can’t Offer Enough Expertise.

While most private banks and advisory divisions in banks offer similar services to their independent counterparts, research has found that they aren’t able to offer enough expertise in all the services they provide.

There are definitely some very experienced and skilled experts at private banks who can provide amazing service in the fields they specialize in. However, the issue often arises in other services offered by private banks. While the advisor you’re working with might be an expert in investment management and give great investment advice, other services like tax advice and estate planning may likely not come from the best experts in those fields.

This is because the best experts of those ancillary services will be running their own businesses rather than working with banks. The individuals working at banks will often be young professionals looking to learn the trade or those who have some knowledge of these ancillary services.

And that isn’t just limited to ancillary services. Private banks are usually the place where most young advisors go to learn their work. Most of these young advisors and managers will only do the work their supervisors tell them while following pre-set guidelines.

Of course, a young advisor needs to learn the profession somewhere. You can’t fault them for not having the right experience yet. However, the issue here is that affluent investors have more to lose than others. They carry more risk than normal investors. Assigning an inexperienced advisor to a high net worth or ultra-high net worth client puts an unnecessary risk on your wealth. Our guide for investors with over $10 million provides further information on the risks faced by affluent investors.

If you looked hard enough, you could definitely find an experienced expert financial advisor at private banks or other institutions. However, the question still remains over the expertise provided in ancillary services.

Wealth Management Firms Offer Expertise Across the Board

Wealth managers and similar independent financial advisory firms will often work with the top experts of each field to make sure they provide you with best-in-class services. At Pillar Wealth Management, our wealth managers have over six decades of experience in working with affluent investors who have $5 million to $500 million in liquid assets. We use our comprehensive experience in financial advisory, portfolio management, and investment management to optimize all our processes to meet your goals.

Plus, we work alongside top-class experts to give you the expertise you deserve when working with ancillary services like estate planning or tax planning. We don’t just want to earn you a return. We strive to make sure you can live a life of financial serenity without having to ever worry about losing your wealth.

Our wealth managers will coordinate all these activities, so you don’t have to worry about dealing with multiple people at the same time. Just relax and let us handle everything! Want to live without worrying about your wealth? Get in touch with us for a free consultation today.

Bank Financial Advisory Firms Don’t Offer Enough Personalization.

This isn’t really the fault of your financial advisor. Banks and large financial institutions naturally have a large quantity of cases on their hands since they’re the first place most investors visit. They also rarely say no to anyone.

Additionally, some large private banks may place quotas on their advisors regarding the number of clients they need to get. These quotas are often unrealistic and require advisors to get more clients than they can efficiently handle.

What does this all mean? The common result here is that your advisors are simply unable to give you the time and attention you deserve. They can’t afford to do their full research and create a truly customized plan to meet your needs. Their work pressure simply won’t allow them enough time to do so.

At the end of the day, your investments will be funneled into the same pre-set plans as their other clients. Though these can sometimes pay off for the average investor, they simply hold too much risk for affluent investors. They aren’t designed to optimize your particular portfolio performance. You can learn more about the nuances of portfolio performance optimization in our guide.

But what’s so wrong with pre-set plans? Surely there’s a lot of research that goes into making them? Yes, pre-set plans can be effective in earning a certain level of return. However, these plans usually try to time the market (which is unsustainable) and are not adjusted to your personal priorities.

Are independent financial advisory firms and wealth managers better in this regard?

At firms like Pillar Wealth Management, you will find a comprehensive process that firstly focuses on establishing your future life goals. We establish your priorities and figure out what you want from your investments by conducting a comprehensive survey.

Once your goals are set, we use them as a guide for our wealth management strategy. The plan is designed to both mitigate your risk AND meet your portfolio performance requirements. We realize that not everyone needs a 10% or higher return per annum to live a peaceful life.

Banks Don’t Often Employ Fiduciary Managers

This is a very important distinction that also allows you to answer the question, “Who are the best financial advisory firms?”

Understanding the role and importance of fiduciary managers can save you from a whole lot of inconvenience. Wealth managers who have a fiduciary duty are obligated by law to always act with your best interests in mind. They must eliminate any potential conflicts of interest from their processes and inform you of any that do exist.

To become true fiduciaries, wealth managers need to become Registered Investment Advisors (RIAs) by getting a license from the SEC. RIAs are mandated to meet stringent quality standards and comply with a strict moral code. They are never allowed to bring their emotions into investment decisions. A fiduciary advisor’s sole focus is to help their client meet their financial and life goals.

The issue is that advisors working at bank financial advisory firms are often not fiduciaries. Though they also want to do what’s best for you, they usually have other interests they also need to serve. This includes their own “goals,” their employer’s bottom line, and the interests of their supervisors.

When it comes to fiduciary financial advisory firms, you won’t find any such conflicts of interest. You also won’t find any commissions or product-based compensations being charged. That’s because these fee structures present potential conflicts of interest.

Pillar Wealth Management only employs fiduciary advisors. For individuals who have $5 million to $500 million in investable assets, we only charge an annual fee on the total value of assets we manage. We do not earn our money in any other way. Interested to learn what it’s like to work with fiduciary managers? Schedule a free chat with us today.

Why do Millionaires Hire Financial Advisory Firms?

If you’re an affluent investor, you might be considering hiring financial advisory firms. Evaluating the benefits and drawbacks of hiring a financial advisor, like any other decision, is important. You should make sure you’re getting enough value from the service to justify the cost.

So why do millionaires hire financial advisory firms?

– Here are a few situations where hiring a financial advisor or wealth manager becomes appropriate:

You are a high net worth or ultra-high net worth individual with more than $1 million in liquid assets and are unable to efficiently handle your wealth.

– You are undergoing a major life event, such as retirement, property sale, etc.

– You want to preserve and grow your wealth sustainably.

– You want to live peacefully and maintain a certain lifestyle.

All of these are situations that can call for the services of a financial advisor. Plus, our hardcover book “The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 million to $500 million” delves even further into why ultra-high net worth individuals need reliable fiduciary advisors.

How Do I Choose a Financial Advisory Firm?

The final question on your mind is probably now, “How do I choose a financial advisory firm?”. To answer this question, we’ve listed four essential characteristics you need to watch out for.

1. Relevant Experience

In the financial advisory world, almost nothing can replace the value of true experience. Wealth managers and financial advisors who have the right kind of experience in working with affluent investors will understand your situation better and will be able to offer better solutions.

Always opt for financial advisory firms that have had success in previously helping clients of your caliber.

2. Cost and Tax Cutting Strategies

Our guide on portfolio performance details how important it is to cut down on unnecessary costs and taxes that are sapping away at your wealth. As an affluent investor, you’re already paying the highest taxes possible and incurring fees for the management of your wealth.

Any unnecessary and avoidable costs your advisor ignores can eventually come back to bite you in the future. When looking for financial advisors, you should always ask about their tactics for reducing your taxes and costs.

3. Asset Allocation Strategies

Minimizing risk is a vital part of your advisor’s job description when you hire them. They need to be able to maintain a consistent asset allocation strategy that protects you against major losses. We’ve seen too many affluent investors lose their money by using aggressive investment tactics and relying only on diversification to reduce their risk.

4. Investment Rebalancing Capabilities

The best financial advisory firms have processes and workflows in place to rebalance your investments in a way that maintains the optimum investment ratio in cash, equity, and bonds.

For example, Pillar Wealth Management uses the 1000 Scenario Stress Test, the Efficient Frontier and other similar components to make sure your portfolio is always on track to meet or exceed your goals.

Conclusion

The right financial advisory firms can provide tremendous value to affluent investors. Whether you need someone to provide financial advice, manage your investments, or handle all your wealth, it’s vital that you do your research. Making the wrong choice of advisors can be costly.

When it comes to Pillar Wealth Management, our fiduciary wealth advisors and managers are fully committed to helping investors with $5 million to $500 million in liquid assets attain their goals. Book a free chat with us via our website, and we’ll explain how our experience can help you.