Getting to know you

Sarah Bull, partner and portfolio manager with KJ Harrison Investors in Toronto, Canada, says questions often fall into three categories: risk, relationship and wealth goals.

“It’s up to the wealth adviser to be asking the clients questions to make sure they understand what the clients’ needs, wishes and wants are around investing,” she says.

The U.S. wealth management industry is highly regulated, and before providing investment advice, financial service professionals must take steps to make sure that guidance is right for their clients. The industry is overseen by multiple departments within the federal government including the Securities and Exchange Commission (SEC) and the Financial Crimes Enforcement Network as well as the Financial Industry Regulatory Authority (FINRA), a not-for-profit regulatory organization.

A wealth manager will ask a series of questions guided by an industry standard called “Know Your Client” (KYC). These questions will include everything from marital status, age and income, to risk tolerance, investment experience and objectives. The KYC rules are also linked to anti-money laundering regulations. In the U.S., these rules are also sometimes referred to as customer due diligence (CDD).

After these basic questions are addressed, your wealth manager will want to go deeper.

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1. Have you worked with a financial adviser before? If so, why did the relationship end?

High-net-worth individuals seeking a wealth manager likely have prior experience working with financial professionals.

“They may feel like they’re outgrowing that individual or their situation is much more complex than when they first started dealing with [them],” says Thomas Trainor, managing director of Hanover Private Client in Toronto.

Others may have managed their money themselves. But if you’ve gotten to the point where you’re running a successful business or are a busy executive, you probably no longer have the time to manage a multitude of investments.

Bull says she wants to know what her clients’ experiences have been with previous advisers to understand what they’re looking for in the relationship and to establish expectations. “Some people want to meet every month, some people want to meet quarterly, some really don’t want to hear from me,” she says.

2. What are your investment values?

Bull says her firm takes a relatively conservative approach to money management, generally staying away from high-flying securities and instead focusing on managing risk and generating long-term returns.

She wants to be sure her clients share those investment values. “Quite frankly, it's not in the client's best interest for me to take them on if they're looking for a different approach,” she says.

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3. Where do you see yourself in 5 or 10 years?

An adviser will want to have a clear picture of your wealth goals. Do you want to retire when your kids start college? Do you want to pay for your grandchildren’s university tuition? Perhaps you own a business and want to have an exit strategy that allows you to cash out in the next five years.

By understanding your financial goals, a wealth manager will be able to tailor an investment portfolio to help you meet them.

4. What does wealth mean to you?

Wealth means different things to different people. To some it means education. Others associate it with the freedom to travel. To a wealth manager, the answer to this question provides clues about when you’re planning on spending your money.

If you’re going to need your money sooner rather than later, your manager may take a more aggressive investment approach. “It’s up to the wealth manager to truly talk about what the goals are versus just are you risk averse or willing to take on risk?” Bull says.

5. If you own a business, are you invested in other industries?

A vital question for business owners, Bull says, is how are they diversifying outside of their own industry?

If your wealth is primarily tied up in your business — or your company’s stock if you're a senior executive — a wealth manager will want to discuss ways to build a diverse portfolio.

“At some point in their life they are going to leave their business — whether it’s on their own terms or not,” Bull says. “They’re no longer going to be attached to the business, so have they prepared for that reality?”

6. What other professionals are you working with?

Wealthy individuals, especially business owners, often need multiple professionals for different elements of their estates. Your wealth manager will want to know if you’re already working with an accountant, lawyer, insurance agent and who’s preparing your taxes.

“Most people, by the time they come to us, they have an accountant and a lawyer. It’s extremely important to know who those people are and what conversations they’ve had or haven’t had with them,” Trainor says.

Tailoring the discussion to your specific goals

Trainor says the types of questions he asks are specific to clients and their individual circumstances. A senior executive with a complex compensation package has different needs and concerns than someone who just inherited $5 million.

“You walk into some banks and if you’re X dollars you go see this person and if you’re Y dollars you go see this person,” Trainor says. “In our circumstance … it’s really specific to the nature of the client and the specific issues they’re facing.”

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About the Author

Nancy Sarnoff

Nancy Sarnoff

Freelance Contributor

Nancy Sarnoff is a freelance contributor with MoneyWise. Previously, she covered commercial and residential real estate for the Houston Chronicle where she also hosted Looped In, a podcast about the region’s growth, development and economy. Her work has been recognized by the National Association of Real Estate Editors and the Society of American Business Editors and Writers.

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