How to Find the Right Financial Advisor: 3 Criteria for High-Net-Worth Clients
KEY POINTS:
The right financial advisor for a high-net-worth client is a fiduciary advisor because only a fiduciary is legally bound to put your interests first in making recommendations
High-net-worth clients need a financial advisor who specializes in that level of investment asset management, which can quickly become complex.
When making recommendations, the right financial advisor will consider tax liabilities at every step to avoid needlessly hurting your investment return.
Choosing the right financial advisor is key, especially for a high-net-worth client. Certainly, you’ll want to ensure your advisor has the necessary credentials, qualifications and expertise. This includes certifications such as Certified Financial Planner™ (CFP®), Chartered Financial Analyst (CFA), or Certified Public Accountant (CPA). These credentials indicate that the advisor has undergone rigorous training and adheres to a code of ethics.
You’ll also want someone who listens to you and follows through on what they say they’ll follow through on. This person and their firm have to be trustworthy in order for the relationship to work. And it is a relationship. Life can get messy sometimes: the market can be volatile, political shifts shake the economy, and personal situations can change quickly. Your advisor needs to be someone with whom you can be honest because only when they know what’s going on are they able to make financial recommendations that support your life and goals.
When you’re in the high-net-worth level, choosing the right financial advisor also needs to include three criteria you may not immediately think about.
Choose a Fiduciary Financial Advisor
First and foremost, understanding that not all financial advisors place your best interests first is key. Only fiduciaries are ethically and legally bound to do so. This means they’re transparent and objective. Capstone is a fiduciary, for example. One of the ways, among many, we ensure our objectivity is that we do not receive commissions on the products we recommend. We are a fee-only service, which means our clients pay us directly, so they enjoy a clear payment structure and know exactly how much they’re paying for financial planning advice.
The best way you can truly trust that an investment advisor is giving you advice that benefits you is to choose one who is legally bound to do so. It’s also a myth that “financial advisor” and “investment advisor” mean the same thing. Because Capstone is registered with the SEC, we are true investment advisors and, as such, are bound to a fiduciary standard. The fiduciary standard is higher than the suitability standard.
Choose a Financial Advisor Who Specializes in High-net-worth Clients
When you’re a high-net-worth client, your investment challenges are unique. As part of your compensation package, C-Suite executives often receive employee stock options. Maximizing this form of equity compensation involves navigating your company’s policy and knowing which nuances to look out for.
As someone maxes out certain investment vehicles like their 401(k), other investment opportunities come into play. A skilled investment advisor can help you navigate which of these will help you meet your goals more efficiently.
Maybe you received an inheritance, an asset whose details vary in complexity. You may be in the process of building and planning your legacy to pass on to your heirs, which likewise has various facets for consideration depending on your personal circumstances.
Many high-net-worth individuals and families participate in philanthropic giving. Your financial advisor should know how to pair your charitable inclination with maximum tax efficiency. This brings us to our next criteria in how to find the right financial advisor.
Choose a Financial Advisor Who Considers Taxes
Tax planning has to be part of your financial plan to avoid taxes from eroding your gains. In order to maximize your wealth accumulation, you’ll want to mitigate the impact taxes have on your investment returns. You’ll also want to make sure that any inheritance, philanthropic endeavors and market shifts are met with a proactive approach.
For this reason, Capstone handles both the tax planning and preparation for our clients. As an independent wealth manager, we consider the income tax impact of financial decisions or recommendations we make. We can then take practical measures to lessen the tax burden for our clients. As the tax code changes, we stay up to date to proactively adjust when it makes sense to do so. Everything we do is in the best interest of our clients.
Disclosures:
This article is not a substitute for personalized advice from Capstone and nothing contained in this presentation is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed by other businesses and activities of Capstone. Descriptions of Capstone’s process and strategies are based on general practice, and we may make exceptions in specific cases. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review by contacting us at capstonefinancialadvisors@capstone-advisors.com or (630) 241-0833.