How Do You Evaluate a Wealth Advisor? 7 Questions to Ask

By David Karp, Co-Founder and Senior Managing Director at Cresset

Besides our family members and close friends, few relationships in life are as important as that of client and wealth advisor … and long lasting. After all, your wealth advisor is trusted with the financial well-being of you and your family, hopefully for generations to come. A good wealth advisor does much more than just manage your investments. He or she will get to know you and your family, your hopes and dreams and the legacy you want to leave. It’s a holistic approach that should be wholly based on the best interests of you and your family.

So how do you evaluate a wealth advisor to ensure you partner with someone who can provide the comprehensive, yet highly individualized set of solutions you need and deserve? Below are seven questions to ask prospective wealth advisors:

1. Are you legally a fiduciary? In other words, are you bound by the fiduciary standard in all aspects of the advisor/client relationship?

Ideal response: The only answer you should accept is, “Yes.” Your wealth advisor should have a legal obligation at all times, and in all situations, to put your best interests first. That should be stated without hesitation and without qualifications. Be sure to get that in writing.

2. Will you outline any and all sources of revenue and compensation that you or your wealth management firm (“firm”) receive from any investments, solutions, strategies or products you may recommend for my portfolio?

Ideal response: There should be none whatsoever. A wealth advisor is only truly on your side if the only compensation he or she receives as your advisor is the advisory fee for all the services agreed upon as part of the client engagement with you. More specifically, an advisor and firm should confirm the following:

  • Provide fee-only advice
  • Do not accept commissions or other forms of revenue compensation
  • Receive only one source of revenue: client fees

3. Is your investment platform a source of revenue for you or the greater firm?

Ideal response: No. A truly independent, transparent investment platform is designed strictly to provide advisors with a comprehensive suite of investment solutions to fulfill the needs and best interests of clients. A wealth advisor’s firm should not trade for its own account or as a principal to any transaction and should not receive any consideration from any manager or solution engaged on your behalf. There should be no “pay-to-play” arrangements, soft dollar, or revenue sharing, as those arrangements present a significant conflict of interest.

4. Do you accept or receive “soft dollars,” defined as alternate forms of consideration or remuneration, for allocating my assets to a particular custodian or manager, or in a particular solution, strategy, or product? (Examples include, but are not limited to, reimbursement of expenses, free research, technology, or other benefits.)

Ideal response: The answer here should be “none whatsoever.” As indicated above, an advisor and advisory firm should receive only one source of compensation: client fees.

5. Are there any circumstances where you can or will receive commissions?

Ideal response: Yet again the answer should be “none whatsoever.” A wealth advisor operating without conflicts of interest should not receive any commissions, placement fees, or revenue sharing.

6. Will you be willing to provide the full details of the embedded costs in addition to advisory fees of any portfolio you recommend?

Ideal response:  Absolutely. Your wealth advisor should be willing to provide total transparency and details of any costs and fees.

7. What services do you and your firm provide besides investment advice?

Ideal response:  A qualified wealth advisor should be able to provide you and your family with a comprehensive suite of investment, wealth planning and family office services. The financial future for you and your family goes beyond your investment portfolio. If applicable, a trusted wealth advisor should be able to help guide you as a true fiduciary on estate and legacy planning, philanthropic strategy, and family office services, such as next-generation family education and values and vision alignment for the whole family.

As you evaluate wealth advisors to help determine what’s best for you, we are happy to schedule a strategy session to discuss your unique needs. Reach out any time!

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About Cresset

Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.

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