Is Your Firm Structured for Success?

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As more consumers turn to comprehensive wealth managers for assistance in putting together a coordinate financial plan, it is becoming increasingly more important to make sure your firm is structured for success. Although consumers can easily find quantitative information such as assets under management, number of employees, number of clients, average account size, etc. through a search of the firm’s ADV filings, sophisticated investors often ultimately base their decisions on the intangibles.

Here are five important factors that most sophisticated investors look for in selecting a wealth management firm:

Factor 1: Competence & Experience
Does your firm have the expertise to deal with the complex issues and fact patterns that the client’s specific situation will present? If you do not have the necessary expertise in-house, do you have a team of subject matter experts on whom you can call for advice?

Factor 2: Durability
Will your firm be able to continue to deliver the service your clients will need for the indefinite future? While you may be contemplating your own retirement in the not-so- distant future, your clients certainly wish you would stick around well into their retirement. Therefore, it is important to have success plans in place either through the expansion of ownership or by bringing on the next generation of planners. Doing so will provide ease of mind to a potential client who is looking to build a long-term relationship with you and your firm. 

Factor 3: Resources
Does your firm have access to different services, products and best-of-class investment ideas? Although most RIAs operate on an open-architecture platform that allows them the flexibility to find investment opportunities from multiple providers, some firms may be limited in its access to institutional investment vehicles or pricing due to its size. 

Factor 4: Performance
Has your firm delivered consistent results in both portfolio management and wealth management objectives over an extended period of time? Ideally, your firm should have demonstrated consistent performance over a full market cycle, and you should be able to provide references who can attest to your ability to accomplish wealth management objectives such as estate tax reduction, wealth protection and income generation. 

Factor 5: Compensation
Is the firm’s compensation structure aligned with the best interest of your clients? Are there any potential conflicts of interest? It is often said that compensation drives behavior. Therefore, it is critically important that you are able to clearly articulate your compensation structure to your clients. They may ask you questions such as, “Does the firm get paid a commission on products it recommends?” “Does the firm have any fee-sharing arrangement with the professionals you suggest?” Although it does not automatically raise a red flag with investors, you should certainly be prepared to answer questions about your compensation structure.


Andrew Chou, CFP®
Senior Portfolio Manager
Westmount Asset Management
Century City, Calif.

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