7 Questions to Ask a Wealth Advisor

7 Questions to Ask a Wealth Advisor

By David Karp, Founding Partner of PagnatoKarp and Senior Managing Director at Cresset Asset Management, LLC.

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 an 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 highly personalized 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 to the fiduciary standard by law?

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. Do you, or the company you work for, receive any commission or additional compensation for any of the investment recommendations you make 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 fee agreed upon as part of your client engagement contract. 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 full suite of investment solutions to fulfill the needs and best interests of clients. There should be no “pay-to-play” arrangements, soft dollar, or revenue sharing, as those arrangements can be a significant conflict of interest.

4. Do you accept or receive “soft dollars,” or alternate forms of payment, 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 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 trusted wealth advisor should be able to provide you and your family with a full suite of investment, wealth planning, and family office services. The financial future for you and your family goes beyond your investment portfolio.

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 $40 billion in assets under management (as of 11/01/2023). Cresset serves the distinctive 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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