Posing these quick-fire questions to a shortlist of wealth managers will help you arrive at a good match quickly, much in the style of speed dating.
Christian Armbruester, Chief Investment Officer at Blu Family Office, explains six precepts that will help potential wealth management clients feel more confident about getting started.
When it comes to our money, it really does become very serious. For most of us, that which we have been able to put aside in a lifetime of labour, must provide for us when we retire. All the while we have many financial obligations to our family and of course the taxman takes a bite out of all we do.
Hence, it is no wonder why we seek the help of someone who knows what they are doing, someone we can trust, and someone who can make all of our (money) problems go away. But with a range of more than 10,000 asset managers, family offices, private banks and wealth managers to choose from, how exactly are we supposed to find the right one?
Apart from calling Ghostbusters (findaWEALTHMANAGER.com), there are a few tricks of the trade that are worth bearing in mind, whilst one aims to discern the professionals from the pretenders:
For anyone who doesn’t have a background in finance or understand capital markets, trying to invest your money is a daunting task indeed. Even the very smart and most accomplished business executives, entrepreneurs, doctors, or senior statesmen will struggle when it comes to the intricacies of applying a co-variance matrix to a value-at-risk investment management system. So, don’t try. Accepting that you know nothing, will allow you to focus on other more important things.
They say, the average person takes five seconds to determine whether they like someone or not. That’s a very short time in the consideration of giving someone your entire wealth and all the information to your life for good measure. But lest we forget, 99% of human decision making is done by the subconscious, so we might as well accept that we are either going to like or not like someone.
99% of human decision making is done by the subconscious, so we might as well accept that we are either going to like or not like someone. Yet just because we like someone, doesn’t mean we have to trust them
Yet just because we like someone, doesn’t mean we have to trust them. Whoever you choose, check them out. Do some basic due diligence, like making sure there are no past offences on the FCA register. With so many public records available on the internet nowadays, it shouldn’t be too hard to verify if someone is who they say they are.
No one knows the future, not even the gods of the City or those super smart billion-dollar hedge fund managers – no one has any more of a clue than my 5-year-old daughter about what is going to happen tomorrow. So, ignore all the fancy jargon, the great economic models or the amazing clairvoyance they are trying to sell you. Trying to make predictions about the unpredictable is a waste of time. Focus instead on their risk management and look at how their portfolios have done in times of market duress. The numbers never lie.
I always loved that line in the movie Philadelphia when Denzel Washington says: “Explain this to me like I’m a six-year-old”. It is amazing how difficult it is to explain something very simply. That’s because only then do you really understand how it all works and why you are doing it.
Have the confidence to say, “If I don’t get it, then that means they are not explaining it to me in the right way”
If you cannot follow what your wealth manager is telling you in terms of what they will do with your money, then that is not your fault. Have the confidence to say, “If I don’t get it, then that means they are not explaining it to me in the right way”. And if they can’t do that, then find someone else who can.
It seems amazing that in everything we do in life, we accept that there is progress and we move on. You won’t find many people using facsimiles anymore, and you rarely see someone sending their letter through the post, when a simple email will suffice. But for some reason, when it comes to our investments, we stick to what we did thirty years ago, with tenacious resistance.
To be clear: picking stocks and buying a few bonds is akin to the stone ages when it comes to building an effective investment strategy
To be clear: picking stocks and buying a few bonds is akin to the stone ages when it comes to building an effective investment strategy. Yes, it worked really well for a very long time, but interest rates are near zero, we have printed $25 trillion (quantitative easing) and the markets are driven by machines (more than 60% of all trading volume is run by computer algorithms). Time to adapt, time to do other things (aptly called alternatives) and time to move on. Note, the previous point still applies and yes you can explain any strategy, no matter how complex. Things either go up or they go down, right?
Life is a numbers game and things change. In other words, even the wisest of choices at the outset may turn out to be different than we thought. Maybe the service was not as promised, maybe the wealth manager you chose at a big private bank left to go somewhere else. Or maybe your tax situation changed, and you needed to switch strategies. There is always a reason to change your wealth manager, and you need a contractual agreement, which states how long it takes for you to get your money back in case you change your mind.
The secret to a successful life, is trying not to do anything stupid. That seems flippant, particularly when it comes to managing our money. But the point is, making investments is risky, by design, otherwise we wouldn’t get paid anything (risk premiums et al). And we have to accept that we won’t get every decision right.
Remember, we are dealing with the future and we don’t know what is going to happen. All we can do is make sound decisions, given all the information available at that time. For so long as we follow these basic rules and use the tools at our disposal effectively, we should be able to make the numbers work in our favour. Happy hunting!