Finding the Right Partner to Help Manage Your Wealth

You have plenty of options when it comes to finding the right partner to manage your wealth. The list includes family offices, multifamily offices, registered investment advisors (“RIAs”), wire houses, broker-dealers, big banks, financial advisors, independent advisors, and robo-advisors.

How do you differentiate and choose what’s best for you and your family? 

The first step toward finding the right fit is to evaluate your needs and goals. Firms can’t be – and shouldn’t try to be - everything to every different type of client, so it’s key to find one that is best designed to address your needs in the following areas: investment philosophy and strategy, investment services, non-investment services, communication style and client engagement. A client of ours once described this as having “wicked strategic focus.”

Here's a breakdown of when your needs would be a good match to a multifamily office or independent RIA, and when they would be better-suited to a larger bank or broker-dealer.

When a multifamily office or independent RIA might be the right fit:

  • If you have a willingness and desire to hire an “outsourced” chief investment officer and family office.
    • This means delegating to a single source for investment and family office services, such as trust and estate planning and tax coordination.
    • This requires trust and comfort in delegating accountability to a third-party staff or advisor.
  • If you place a premium on firm/advisor independence and the ability to minimize potential conflicts of interest and bias.
    • By being independent from internal investment products and lending products, a multifamily office or RIA can avoid more bias and provide greater transparency.
    • Often, independent firms without their own bank and lending products can “shop around” for the best lending product for clients because they are not required to use the investments and loans offered internally. 
  • If you have a need and desire for advice and recommendations, a multifamily office or RIA can provide input beyond just investments, including trust and estate planning, tax planning, balance sheet reporting, investment policy statement (“IPS”) development, next generation planning, and philanthropic planning.
    • While perhaps counterintuitive (vs. working with larger firms), this comes back to multifamily offices having a strategic focus on a smaller number of clients with these specific investment and tax and estate needs, and thus having the process and infrastructure in place to support those needs. It’s easier to be nimble and cater to specific needs when working with a smaller number of similar clients.   
  • If you are interested in accessing more niche and specialized investment managers who offer bespoke investment opportunities that are not available to the general public.

When a larger bank or broker-dealer might be the right fit:

  • If you have a willingness and desire to personally take on the “chief investment officer” role across investments and the family office functions, including trust and estate planning, tax planning, and global balance sheet reporting.
    • There is potential for fee savings in taking on these accountabilities yourself. 
  • If you need additional investment services beyond wealth management, including investment banking and in-house global economic and stock research, which a larger bank or broker-dealer may have more robust staffing and services to accommodate.
  • If you want robust self-directed brokerage trading accounts, such as “personal trading account” for stocks, bonds, and options trading.
  • If you want the potential ability to negotiate “relationship-based” pricing on lending products and consumer products, such as mortgages and credit cards.
    • Caveat: this can be offset or mitigated by “shopping around” and negotiating (yourself or your advisor) with different banks.

Questions to ask when searching for the right fit:

While searching for a firm, it helps to have a list of questions to refer to while interviewing them. Here are  questions we recommend asking yourself and the firm’s representatives as you talk to gauge the right fit.

  • Does this team and firm operate with integrity, honesty and transparency? What evidence of that do I have? 
  • Find out what you will pay for.
    • Are you hiring someone to simply transact investment decisions for you? And if so, could this be accomplished on a do-it-yourself basis through a larger firm?
    • Are you hiring someone to serve as an advisor, or an outsourced Chief Investment Officer?
    • Are you paying for the broader services of an outsourced Family Office?
    • Will you pay different fees depending on how the portfolio is invested? Do all similar clients pay the same fee, or is there a discretionary range for how fees are determined? If so, where do you fall in this?
    • Ask to see the firm’s Form CRS.
    • How much delegation do you want and need, and how much are you paying for within the fee or commission? 
  • Does it feel like you are hiring the firm or the financial advisor? Where does your comfort level with the services and investment advice and acumen provided come from: the advisor herself/himself, or with the firm? Said another way, if the advisor ended up leaving, would you feel as comfortable with the firm providing the same needs?
  • How are the firm and its advisors compensated? (Incentives typically drive action.)
    • Are there services and investment products the firm and advisors receive higher compensation or commissions on? (For example: mutual funds, lending products, alternative investments, structured products, etc.)
    • Do they receive compensation or pay for referrals? Note: Reference the firm’s Form CRS, available on every firm’s website, to compare how their advisors are compensated.
  • Is the firm a fiduciary or not, and what does the answer mean when it comes to their practice and investment strategy? Firms typically adhere to the “fiduciary standard” or the “suitability standard.” Ask whether your advisor following the fiduciary standard or the suitability standard and discuss this further with each advisor as it relates to the advice and products being offered. Many brokerage firm advisors are paid commissions to sell you products that the firm makes money from. Therefore, their investment advice may be influenced by the commissions they get paid. Note: Reference the firm’s Form CRS, available on every firm’s website, to compare how their advisors are compensated.
  • What does their typical client “look like” and does that feel like you? 
    • Is the firm and its infrastructure suited for a client with your needs? How do they prove it?
    • Ask for two to four existing client referrals that give a range of experience you find relevant (recent clients from the last two years, long-term clients, clients with similar family backgrounds and needs, clients with similar industry and transactional background, etc.)
  • What is the firm’s investment philosophy? Can they articulate how they achieve long-term results for clients, and how does this differ from other firms?
    • Can this be accomplished on your own in a self-directed account?
    • If you are delegating to an advisor, how is the firm held accountable to the strategy and philosophy?
    • During inevitable tough market periods, how do the advisors react and what is their approach? Can they demonstrate this from past market experiences?
    • Can the firm provide its historical client performance over a range of time periods?
  • How simple or complex are your tax, trust and estate needs and how much investment advice and outside financial planning do you want to delegate and pay for?
    • Do you need tax planning, trust and estate planning, debt planning, or balance sheet reporting? 
    • How suited and comfortable is the firm at interacting with your extended professional team (CPA, attorneys, etc.)?

Since you are interviewing and hiring a trusted team to assist you with important investment and planning decisions, as you interact with prospective firms, ask yourself: are they providing you “candor or pander”?

Article by Tom Gallanis, Executive Director, Client Advisory, Crestone Capital.

Important Information

This material is solely for informational purposes and does not constitute a recommendation or offer to sell or a solicitation to buy securities. The opinions expressed here represent the current, good faith views of Crestone in October 2022 and are provided for limited purposes, are not definitive investment advice, and should not be relied on as such. The information presented herein has been developed internally and/or obtained from sources believed to be reliable. However, Crestone does not guarantee the accuracy, adequacy, or completeness of such information.

Predictions, opinions, and other information contained here are subject to change and without notice of any kind and may no longer be true after the date of publication. Crestone assumes no duty to update these statements.