How To Select A Wealth Management Firm

Due diligence is essential to selecting the right financial advisor to serve as your family’s personal Chief Financial Officer (CFO). Before interviewing potential advisor candidates, do a simple screening that’s based on three characteristics that are essential for obtaining advice where your interests are always considered first. It will reduce an overwhelming mass of choices down to a surprisingly small group to choose from. Finding the right fit is then much easier. Knowing how to cull the list is not complicated.

Step 1: Identify Registered Investment Advisors (RIA). The first step in the sorting process is to identify which “financial advisors” actually provide financial advice within a Fiduciary Model. Knowing whether an advisor is a fiduciary separates those who are client-focused from those who are likely to be company-focused. Fiduciary standard of care is one of the least understood and yet the single most defining difference among a highly crowded field of those who call themselves “financial advisors.”

Step 2: Identify which RIAs are independent. Due to hybrid compensation arrangements, brokers may be dually-registered as RIAs while employed by a bank, a local brokerage company, or a national Wall Street firm. While brokers are titled “financial advisors,” and often adopt the title “wealth manager,” their fiduciary standards of care are highly selective. While limited fiduciary services are offered, such advisors usually default to the much less stringent “suitability standard” whenever the opportunity arises.

Step 3: Identify credentialed independent RIAs. You want to see substantial education and training in finance and investments to avoid yet another salesperson. A number of designations may be representative, but the most reliable single evidence for competence as a wealth advisor prior to an initial interview is holding a Certified Financial Planner (CFP®) designation and a professional listing with the public with the Financial Planning Association® (FPA®).

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