High-net-worth individuals need a financial advisor who understands how to manage substantial assets. A wealth advisor should understand how to balance risk mitigation and growth, and what investment options are specifically available to accredited investors and other high-net-worth individuals. An advisor should also provide comprehensive financial services, usually including wealth management, tax strategies, and estate planning.
If you’re an accredited investor with a net worth of at least $1 million (or more), here’s how to find a wealth advisor who’ll be able to help you.
Why Do High-Net-Worth Individuals Need Specialized Financial Guidance?
High-net-worth individuals need specialized financial guidance for multiple reasons.
One obvious reason is that the size of a portfolio amplifies the results from financial advice. Good advice may yield more returns when investing a large portfolio, and bad advice could result in larger losses. This is far from the only reason, though.
Other reasons why high-net-worth individuals need specialized financial advice include:
- Comprehensive Services: Investors with high net worths often need guidance in multiple financial matters. They don’t just need someone who can select good investments, but may want someone who can assist with estate planning, business valuations and philanthropic goals.
Many investors may use a wealth manager, attorney and certified public accountant (CPA), who together can provide in-depth financial, legal and tax services.
- Investment Advice: Accredited investors are those with at least $1 million in assets (individually or jointly, or $200,000 annual income (individually) / $300,000 annual income (jointly).
Certain investments are available to accredited investors, which those with lower net worths or incomes can’t access. Investors with well over $1 million might have access to even more exclusive investment options. A wealth manager should be able to recommend these options to high-net-wroth clients when appropriate.
- Tax Planning: Many investors with larger net worths have property, investments or incomes from different tax nexuses (jurisdictions). They could be subject to different federal, state and local taxes, and even other countries’ taxes if property is held internationally.
A wealth manager needs to know the tax regulations in any nexus where assets or investments are held, both so taxes can be paid and so investment advice takes into account the different tax implications.
If you don’t currently have a wealth advisor who offers services for high-net-worth individuals, use our online financial advisor matching tool to get connected with someone. Based on a few questions — including net worth — we can match you with a financial advisor who’ll be able to help you.
What is a Wealth Advisor?
A wealth advisor is a financial professional who provides comprehensive financial planning and investment management services to high-net-worth individuals and families. They typically have expertise in various areas, including investments, tax planning, estate planning, and risk management.
Compared to financial advisors who normally work with clients who have more moderate net worths, a wealth advisor’s services are often more diverse. They also usually have more experience working with high-net-worth clients.
Role and Responsibilities of a Wealth Advisor
A wealth advisor is someone who serves you in a consulting role. They’re to provide sage financial advice, and then to act on the decisions you make. It’s still you who should be deciding what to do with your assets.
Developing a Personalized Financial Plan
Perhaps the most foundational service that a wealth advisor provides is helping you develop a personalized financial plan. This requires understanding your current financial situation, as well as your financial goals. An advisor can then help you devise a plan to hopefully take you toward those goals.
Once a financial plan is developed, a wealth advisor provides ongoing services. They actively monitor your portfolio, recommend adjustments when markets change, and take care of trades, tax preparation, and other practicalities. They’ll also update you on portfolio performance, account holdings, etc.
Ongoing Monitoring and Assistance
The personalized financial plan may be revised if there’s a major update in your life, if market conditions significantly change, or for a number of other reasons. Your advisor should be staying in periodic contact with you, so any necessary adjustments can be promptly discussed.
A wealth advisor isn’t someone who you talk with only once. They’ll provide ongoing support, aiding with investment decisions, your personalized financial plan, and other financial areas whenever you need them to.
Different Types of Wealth Advisors
Several types of financial professionals offer wealth advisory services for high-net-worth individuals. You might consider any of the ones listed.
Registered Investment Advisors
Registered investment advisors (RIAs) specialize in securities investments, which encompass the bulk of most individual investment portfolios. Securities include stocks (and mutual funds), options, other derivatives, government bonds, corporate bonds, certificates of deposit (CDs), and many similar investments that are traded.
The services that an RIA firm provides can include most wealth management services, including financial planning, retirement planning, estate planning, insurance, tax guidance, investment management, and others. Their unique specialty is primarily in securities investments.
RIAs must register either with a state body or the Securities and Exchange Commission (SEC), and they have a legal fiduciary responsibility to serve you. Most RIAs structure their fees as a percent of assets under management (AUM). For example, you might pay 1% of your portfolio’s value annually.
Certified Financial Planners (CFPs)
Certified Financial Planners (CFPs) provide a broad range of wealth management services, frequently including retirement planning, estate planning, insurance, tax guidance, and other financial planning services. This is a fairly broad but high level of certification.
The CFP certification is awarded by the Certified Financial Planner Board of Standards, Inc. Becoming a CFP requires several years of experience, passing exams in several areas of financial planning, and adhering to a strict code of ethics. CFPs have a fiduciary responsibility.
The fees charged by a CFP can be more varied, just as their services might be too. A CFP may charge a percentage of assets under management, a flat ongoing fee, and one-time fees for certain services.
Wealth Managers
A wealth manager is a financial advisor who primarily works with affluent clients, those that have wealth. Wealth managers may provide all of the aforementioned services: retirement planning, estate planning, insurance, tax guidance, and others.
While many wealth managers are fiduciaries, the title itself doesn’t require that a wealth manager be one. You can ask a wealth manager whether they’re a fiduciary, and also ask for any conflict of interest disclosures.
Family Offices
A family office usually offers comprehensive financial services to ultra-high-net-wroth individuals. Many clients of family offices have $50+ million or $100+ million. Offices may work with just one family, or a small number of families.
In addition to the standard financial services, a family office will often spend significant time working through succession planning. The HBO series “Succession” is even based on a family office. The succession planning that a real family office provides is quite different from the drama in Succession.
Succession planning involves deciding how to pass on a family’s wealth. Families work through who should receive which assets, and the family office team decides how to best execute the family’s plan. A significant amount of time is often spent educating the next generation about the family’s wealth. This may include teaching how to manage wealth, how to invest assets, and how to run the family business(es).
Most family offices provide all of the standard wealth management/financial planning services, and also extensive legal and tax services. Offices will usually have at least one wealth manager, attorney, and CPA, if not a small team of these and other professionals.
The exact structure, services and fees of a family office are highly customizable, especially if the office serves just one family. Running a family office isn’t cheap, though, so this option usually only makes sense for the ultra-wealthy.
Key Credentials and Experience to Look for in a Wealth Advisor
Unlike the terms RIA and CFP, the title “wealth manager” and “wealth advisor” aren’t regulated terms. Essentially, almost any financial advisor can call themselves a wealth advisor.
There are many excellent wealth managers and wealth advisors, but it’s important to verify their credentials since this isn’t a regulated title. Specifically ask about education, experience and certification.
A wealth manager hopefully has formal training in finance (e.g. a finance or related degree), and should have at least several years of experience.
They may have one or more industry certifications. These can include the RIA and CFP designations, and also others. Two other main ones are the CFA and the CPWA.
Chartered Financial Analyst
A chartered financial analyst is an international designation awarded by the CFA Institute. This is one of the most respected certifications for financial professionals, and is generally considered the highest certification in investment analysis.
Becoming a CFA requires extensive experience, at least a bachelor’s degree, and passing a three-part exam that covers accounting, economics, money management, security analysis and ethics. Only experienced financial professionals sit for the exam, and the pass rate is still below 50%.
A CFA can offer a diverse array of services, but the certification’s primary focus is in investing. A wealth manager who’s a CFA has demonstrated that they understand how to manage large portfolios.
All CFAs are required to serve as fiduciaries, looking after their clients’ best interests.
Certified Private Wealth Advisor
Certified private wealth advisors (CPWA) generally work with clients who have $5+ million in assets.
The CPWA is another high-level certification, requiring at least 5 years of experience. Most offer standard financial planning services, with a focus on managing large portfolios. They may also be experienced in succession planning of sizeable portfolios and assets.
You might consider a CPWA if you have more assets than a typical financial advisor manages, but not the $50+ million that’s usually needed for a family office. CPWAs are fiduciaries.
Critical Questions to Ask Potential Wealth Advisors
Being a fiduciary and having a certification is an important qualification for a wealth advisor. Those don’t automatically mean that someone is the right wealth advisor for you, though. Here are a few questions to ask when evaluating whether you want to hire someone as your wealth manager.
Do you have experience with high-net-worth clients?
A wealth advisor should have experience working with clients who have net worths similar to yours. This could be $1 million, $10 million, $50 million or more.
What’s your performance track record?
When it comes to investments, a wealth advisor should have a strong track record. Ask how their clients’ portfolios have fared over the past year and several years, when compared to benchmarks. Look for strong performance over several years, at least.
What’s your investment philosophy?
A wealth advisor’s investment philosophy should match your risk profile, time frame, goals, and own approach to investing. Find out how they go about constructing a portfolio and allocating assets.
What specialists are on your team?
Most wealth advisors who work with high-net-worth clients have small (or large) teams of specialists. Ask what specialists an advisor works with, and what certifications those specialists have. They could be knowledgeable in legal matters, tax, investing, or another area.
What communications can I expect?
Find out how often you can expect to hear from an advisor, and how available they are when you have questions. Regular updates and frequent communication ensure your plan is promptly updated when necessary.
What fees do you charge?
Look for a fee structure that is transparent, and aligns the advisor’s incentives with your goals. You’ll likely pay a percentage of assets under management, and possibly some additional fees depending on the services rendered. Also, ask what disclosures you can expect if there’s a potential conflict of interest.
Red Flags to Watch Out For When Choosing a Wealth Advisor
In general, be weary of any advisors who have over-realistic promises or less-than-transparent policies. Some red flags to watch for are:
- Poor Performance: Not getting good investment advice will literally cost you. A poor track record indicates that an advisor’s investment advice may not be the best.
- Unrealistic returns: Over-promising returns can set up false expectations, and may not be realistic to what you can expect. This is especially true if there’s not increased risk.
- Lack of Transparency: Vague or opaque fee structures can lead to bills that are higher than expected. Not disclosing conflicts of interest could jeopardize the quality of advice.
- High Pressure: You shouldn’t feel pressured to make any financial decision, and that’s true when selecting a financial advisor. Find someone you’re comfortable with.
Find a High-Net-Worth Financial Advisor
If you have a high or ultra-high net worth, make sure you find an advisor who understands managing your level of wealth. You can connect with a qualified financial advisor by using our matching tool. Answer a few simple questions, including estimating your assets, and we’ll find you someone who’s able to manage your level of wealth.
General Disclaimer: The information provided on this site is for informational purposes only and should not be construed as financial advice. Invested Better does not guarantee the accuracy or completeness of the information provided. Please consult with a licensed financial advisor before making any financial decisions.
Investment Risk Disclaimer: Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
