How to hire an Ultra High Net Worth financial advisor

When interviewing potential high-net-worth financial advisors to work on your family’s behalf, you should ask a number of pertinent questions, beyond getting basic contact and bio information, education, and credentials. You want to hire an advisor who is familiar and capable of dealing with individuals of your net worth and understands your entire financial picture.

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

Here are some additional factors to consider and questions to ask when hiring an ultra-high-net-worth financial advisor:

1. Experience

Inquire about the advisor’s experience specifically working with clients in a financial situation similar to yours. Ask for examples of successful outcomes they have achieved for ultra-high-net-worth individuals.

2. Specialization

Determine if the advisor specializes in the areas that are relevant to your specific needs, such as estate planning, tax optimization, philanthropy, or investment advice. A specialized financial professional or advisor can provide tailored strategies and solutions.

3. Network and Resources

Ultra-high-net-worth advisors should have a strong network of professionals, including tax experts, lawyers, and private bankers, who can collaborate to address complex financial matters. Ask about their network and how they leverage it for their clients’ benefit. However, it is important to keep in mind that investing involves risk.

4. Fee Structure

Understand the advisor’s fee structure and ensure it aligns with your expectations. Some advisors charge a percentage of assets under management, while others charge a fixed fee or a combination of both. Clarify what services are included in the fee and if there are any additional charges.

5. Confidentiality

Ultra-high-net-worth individuals often value privacy. Discuss confidentiality policies and measures the advisor has in place to protect sensitive information.

6. Performance Measurement

Inquire about how the advisor measures investment performance and aims to outperform benchmarks. Understanding their investment philosophy and strategy is crucial to ensure it aligns with your goals and to evaluate their track record of investment performance.

7. Communication and Availability

Determine how frequently the advisor will communicate with you and in what format (e.g., in-person meetings, phone calls, emails). Clarify their availability and responsiveness to your inquiries.

8. Regulatory Compliance

Ensure the advisor is properly licensed and registered with the appropriate regulatory bodies. Check if there have been any disciplinary actions or complaints against them.

Remember to trust your instincts and choose an advisor who not only possesses the necessary expertise but also demonstrates a genuine interest in understanding and meeting your unique financial needs as an ultra-high-net-worth individual.

9. Securities and Exchange Commission

The US Securities and Exchange Commission (SEC) is a regulatory body that oversees the securities industry, including investment advisors. When hiring a financial advisor, particularly as an ultra-high-net-worth individual, it is crucial to ensure that the advisor is properly licensed and registered with the SEC or relevant regulatory authorities in your jurisdiction. You can do this by checking the SEC’s Investment Adviser Public Disclosure (IAPD) website or using the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck tool. These resources allow you to look up an advisor’s background, qualifications, and any disciplinary history or complaints

The SEC requires investment advisors who manage assets above a certain threshold to register with the agency and adhere to specific regulations. By doing so, they become subject to regulatory oversight, which helps protect investors’ interests. Registered investment advisors (RIAs) must comply with disclosure requirements, maintain accurate records, and act in their clients’ best interests, among other obligations.

By confirming that an advisor is registered and in good standing, you can have greater confidence in their compliance with regulatory standards and their commitment to serving clients ethically and responsibly.

One of the first questions you’ll want to have answered is: “Does the advisor present any conflicts of interest?” Conflicts of interest can arise in many different forms. For example, does the advisor receive any commissions on products recommended or sold? How about referral fees? Does the advisor manage the investment(s) they recommend? These are all red flags that suggest a conflict of interest—and in a perfect world, you want to avoid that entirely.

You want an investment advisor who is a fiduciary. A fiduciary is required to disclose conflicts and to serve you objectively at all times. Many who call themselves financial advisors must only meet the standard of “suitability”—advising based on whether an investment is suitable is not the same as acting in your best interest.

Some of the major financial houses are notorious for selling both ends of a transaction and pocketing money from each side. It’s hard to see how that works in the best interest of the client. And yet that is what broker-dealers do. They sell, and they buy, and they make a profit, whether it’s on the commission or on the spread between the purchase and sales prices. For the client, it amounts to a conflict of interest. Major broker-dealers make money on the spread between the purchase and sale prices. This happens a lot with municipal bond purchases.

Broker-dealers don’t work for free!

Non-commissioned fiduciary advisors might recommend you buy insurance, but they would not receive a commission or indirect compensation. They are not advising you to buy so that they can make money but rather because it’s the right thing to do and is what is best for you. Since the commissions don’t influence the advisors, they may be able to find low-cost policies, saving you fees upon purchase and/or redemption.

The advisor’s only goal should always be your best interests—not to support the sales and marketing team or the fat pockets of the insurance company.

Some wealth advisors serving in a fiduciary capacity might still be working on commission. Always look a little deeper, and don’t be afraid to ask the question: “Is the advisor receiving any compensation other than his or her fee for services?” You must be vigilant for conflicts of interest at all times. You may not be able to eliminate all of them, but smart investors will always be aware of them.

You also, of course, need to understand the advisor’s fee and fee structure. The fees can range from as low as .25 percent if you have half a billion or more invested—or, if you are investing with a money manager, the fee could be as high as 2 percent plus 20 percent of profit. It depends on what the experienced financial advisor is doing for you.

Fees, fees, fees—it’s always about the fees.

When one of our new ultra-high-net-worth clients, who happens to be one of our high-net-worth investors, brought in his investment statements for review, we noticed several million dollars were invested in hedge funds—so, we began to ask questions: When did he invest in these funds? Who was the wealth manager? What was their performance, and was he happy with the funds?

The answers were shocking. It turned out his investment advisor managed the hedge funds. So that investment advisor—who has a fiduciary responsibility to provide independent advice in the best interest of the client—was recommending that his client invest in the same funds he managed.

Not only was the advisor earning a 1 percent advisory fee on the investments, but he was also pocketing 2 percent as a hedge-fund fee, plus 20 percent of the profits from the investments. We made sure the client understood this was a major conflict of interest, and we explained the fees the advisors were generating on the accounts, ultimately resulting in the advisors making even more money from the investments.

A High-Net-Worth Financial Advisor Provides Added Value                 

Being wealthy has many advantages, especially having the peace of mind that comes with financial security. High-net-worth individuals accrue benefits in the world of wealth management as well, where a skilled wealth advisor or wealth manager can guide them in making informed decisions and maximizing their financial growth.

Services Provided

Having a net worth of at least $1 million, including substantial liquid assets, allows high-net-worth clients to benefit from a broad range of financial planning services. You can hire a financial planner to assist you with a multitude of services, particularly investment options that are personalized to meet your financial goals, leveraging your liquid assets effectively.

A high-net-worth financial advisor will work with you to develop an asset portfolio that includes stocks and other securities, as well as mutual funds. Your wealth advisor can recommend alternative investments, such as real estate trusts, while advising you on creating a balanced portfolio to minimize risk.

When working with you to develop an estate plan or retirement plan or resolve a complex tax situation, a high-net-worth financial advisor can, if needed, enlist the help of other professionals, such as lawyers, to ensure a comprehensive approach. Additionally, they can provide guidance on succession planning services, assisting in the smooth transfer of wealth and assets to future generations. Moreover, they can help create and implement a personalized financial plan tailored to your specific goals and circumstances.

Tax Planning

Wealthy individuals pay a lot of taxes, and working with a high-net-worth financial advisor provides the opportunity to fine-tune your investment portfolio and engage in effective tax planning strategies to reduce your tax bill.

A high-net-worth financial advisor can work with you to develop a strategy for reducing your tax burden through tax loss harvesting, as well as looking at real estate investments and creating charitable trusts. A high-net-worth financial advisor can work with you to reduce your capital gains taxes by selling stock options in a tax-efficient way.

Estate Planning

Legacy planning is an essential aspect of retirement planning, as it involves considering how to leave a meaningful financial and emotional legacy for future generations. It encompasses identifying and documenting one’s values, goals, and wishes, as well as making arrangements for the transfer of assets and wealth.

By incorporating legacy planning into the process, individuals can ensure that their loved ones are taken care of and that their values and intentions are preserved even after they are gone. This comprehensive approach not only focuses on personal financial security but also on leaving a lasting impact and creating a positive influence.

Protection from Lawsuits

A high-net-worth financial advisor can help protect you from lawsuits by recommending the insurance policies you might need. Your wealth can be protected by putting assets into a trust, and your wealth advisor will work with a trust attorney to create the trust.

For Those Who Aren’t Wealthy Yet

High-income earners who aren’t yet millionaires can also benefit from financial planning, especially when it comes to debt management. They may have substantial outstanding loans, and a high-net-worth financial advisor can help them plan how to effectively manage and eliminate their debt through a budgeting and savings plan. Younger people may not have the knowledge and experience to make the most profitable investments. A high-net-worth financial advisor can help them build an asset portfolio to start building wealth.

Advisory Firm

An advisory firm is a specialized professional service organization, such as a wealth management firm, that offers expert advice and guidance to businesses and individuals. These firms are typically composed of a team of experienced consultants, analysts, and advisors who possess deep knowledge and expertise in specific industries or areas of business.

The primary goal of a wealth management firm, as an advisory firm, is to help its clients make informed decisions, solve complex problems, and achieve their strategic objectives. They provide valuable insights, analysis, and recommendations based on thorough research and industry trends, enabling clients to navigate challenges, capitalize on opportunities, and optimize their performance.

Advisory firms offer a wide range of services tailored to the unique needs and requirements of their clients. They may provide financial advisory services, such as mergers and acquisitions, capital raising, and risk management. Additionally, they may offer management consulting services, assisting with business strategy, organizational restructuring, process improvement, and operational efficiency.

Advisory firms can also provide specialized expertise in areas such as technology consulting, marketing and branding, human resources, and legal and regulatory compliance. Their comprehensive approach combines industry knowledge, analytical skills, and strategic thinking to deliver customized solutions that address the specific objectives and challenges faced by their clients. Overall, advisory firms play a crucial role in guiding organizations and individuals toward success by providing expert advice and helping them make well-informed decisions in today’s complex business landscape.

Finding a High-Net-Worth Financial Advisor

Finding a high-net-worth financial advisor isn’t easy, but it’s not impossible. Someone you know may have an advisor with whom they are on the way to meeting their financial goals, so you can talk to people in your network to get a recommendation.

There are plenty of online resources available for finding a high-net-worth financial advisor to cater to individuals with high net worth. Many financial management firms provide a website search feature specifically designed to locate a wealth advisor suitable for higher-net-worth clients. You need someone who has the expertise to manage the complex financial life of a high-net-worth individual. What’s critical is that any advisor you might like to work with has the background and experience to help you achieve your financial goals while considering your wealth. The advisor should be a fiduciary, which means they put your interests ahead of their own, particularly important when dealing with high-net-worth individuals.

Look for the CFP designation or ask for a written disclosure of the advisor’s fiduciary status.

Certified Financial Planner (CFP)

A Certified Financial Planner (CFP) is a professional who possesses a deep understanding of finances and is committed to helping individuals and families achieve wealth and more wealth. With their extensive knowledge and expertise, CFPs provide comprehensive financial advice and create personalized strategies to manage investments, tax optimization, estate planning, and risk management. They are trained to analyze complex financial situations, assess clients’ financial needs, and develop tailored solutions to meet their objectives. CFPs adhere to a strict code of ethics and have a fiduciary duty to act in the best interest of their clients. By obtaining the CFP certification, these professionals demonstrate their commitment to maintaining the highest standards of competence, professionalism, and integrity in the field, allowing clients to pursue their goals.

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