Wealth management is no different, except in one key area: it’s critical that you understand not only the services you are provided, but also the philosophy behind how the firm you choose to work with is paid for its services. If you don’t understand this, you could end up with a lack of alignment between your needs and intended outcomes.
The fee schedule should limit conflicts of interest so that investment selection and recommendations aren’t influenced by commissions, finder’s fees, etc. This generally leads to a fee-only service model, which in my opinion is the best way to ensure your objectives are aligned with your financial advisor.
How fees are charged should create choice for the wealth creator by encouraging a discussion about the different investment assets and what type of advice and management is needed.
There needs to be recognition that certain asset types require varying levels of management and the fee schedule should reflect this. For example, there could be distinctions between full fees for ongoing management of liquid assets, reduced advisory fees for certain illiquid assets like partnerships or real estate, and even lower administrative fees for assets that you would like considered only for asset allocation or reporting purposes, but don’t require management assistance and oversight.
It is best when the structure of the fee schedule looks at your situation holistically, not just your liquid assets. Considering your consolidated assets allows for better planning and decision making, which increases the probability of achieving your desired outcomes. This also includes building relationships with your other advisors and asset managers, so that the wealth manager is fluent in all of your holdings and is able to address your issues from a big picture perspective.
Wealth management services are by nature more comprehensive and potentially more expensive than other advisory solutions, but the benefits are also much greater. When designed correctly, you can worry less and be more confident about your financial life, think less about your money, and have more free time to do the things you love.