How to Choose a Wealth Manager in India?

An efficient wealth manager will bestow you with peace of mind by enabling you to protect your assets and finances alongside increasing your wealth and net worth. This professional will help you take your most vital financial decisions.

Therefore, choosing a specialised person in the domain is essential. You may wonder about how to choose a wealth manager. To help you out, here is a guide.

With a growing number of Indians becoming members of the millionaires club, the demand for wealth management services in India is gaining popularity fast. For these affluent people, categorised as high-net-worth, semi-high-net-worth and ultra-high-net-worth individuals, the process of managing their vast finances turns out to be a challenging job. In this scenario, the need for a wealth manager is felt.

The primary two goals of wealth management services involve the growth and security of existing assets and investments of these millionaires. To accomplish these objectives, wealth managers offer specialised services to their clients.

Wealth management services in India are classified into three types. These are listed below.

1. Banks

In investment management services, the banking sector holds the most significant stake in the industry. They also offer comprehensive investment portfolio options, and besides catering for HNWIs, they offer wealth management services to mid-level wealthy clients.

1. Brokerage Firms

Brokerage firms offer investment options to their clients, mainly in the equity markets instruments like shares and bonds.

1. Boutique Advisory Firms

Boutique advisory firms focus on providing tailored investment management and financial advisory solutions, mainly to HNWI, semi-HNWI and ultra-HNWI clients.

With the rising competition, this industry has been segmented into financial advisors, tax consultants, financial institutions, insurance consultants and the private banking sector in India.

Mentioned below are the factors one should consider while choosing a wealth manager:

• Defining Your Investment Goals

Defining your investment goal is the first thing you need to know, which will help you get the right wealth manager. Since the speciality areas of wealth management providers vary, once you define your goal, you can figure out the type of features you should search for in the profession you choose. If your investment goal is regarding estate planning, retirement planning, tax planning, etc, you can hire a wealth manager specialising in that particular field.

• Experience

Having adequate experience in the investment sector and providing financial solutions to multiple clients should be a significant determining factor in finding a qualified professional. A long experience in the market, especially those who have gone through multiple economic cycles, can take care of your investment portfolio in a much better way.

• Type of Clients

Typically, wealth management professionals provide consultancy services to high-net-worth individuals. However, while some of them work with HNWI clients, many concentrate on Semi-HNWIs and Ultra-HNWIs. Therefore, when choosing a wealth manager, asking about the type of clients handled by the professional makes sense to understand their expertise level.

• Check and Compare Fees:

In general, wealth managers charge their clients in two different ways: a fee based on the specific service or by commissions on the type of product they sell. Again in fee structure, there are two variations. One is fee-only, while the other is fee-based. In a fee-only method, the professional may charge you hourly, daily or monthly, and the charge remains the same regardless of your investment value.

• Availability of the Professional

While you cannot expect or need to communicate daily with your wealth manager, they should be in touch with you on a periodic basis. Equally, they should review the result of your investment portfolio, preferably every quarter and let you know the updates. So, before choosing the advisor, know about their availability or how they will communicate with you.

• Track Record

Make sure to get reviews from clients who have obtained wealth management services from the professional you choose. You need to inquire about some of these clients randomly to get an idea of how they have experienced the customer services of the wealth manager in question.

Following are five essential questions to ask while you hire a wealth manager:

1. Do You Stick to the Fiduciary Standard?

Ideally, you should work with a wealth manager who adheres to the fiduciary standard. Fiduciaries are those who are obligated to execute their jobs consistently for your best interest, no matter even if they earn less. So, for example, if an investment manager is a fiduciary, they should opt for those investment options they consider best for you. On the contrary, a non-fiduciary advisor is only required to go for investments which are 'suitable' to meet your needs.

1. What Are the Services You Cater?

The services provided by wealth managers differ among professionals. While many provide financial plans, they will not take charge of managing your assets. Similarly, many people focus on investment advice, while others take care of your finances, including retirement, insurance, or tax planning.

1. What Type of Investment Philosophy Do You Follow?

It makes sense to work with a wealth manager whose investment philosophy or approach to opt for investments matches your needs. For example, assume you want to go with simple investments that you can understand. Working with a consultant who likes to put money in diversified and complex ways to maximise your ROI may confuse and worry you. On the other hand, hiring one who is on the same page will make you confident during market fluctuations.

1. Do You Provide Personalised Service?

You can expect the desired result from a wealth manager only when the professional actively makes your financial decisions. So make sure to hire someone who will be in regular touch with you. The professional will depute a dedicated and well-versed person to take care of your wealth in their own absence. However, every wealth manager does not provide this kind of service. So, asking this question will determine if hiring a professional suits your needs.

1. How Will You Choose Investment Options for Me?

In investment management, there is no universal rule. Instead of investing your money in a single basket, a knowledgeable wealth manager will go for diversifying your investment portfolio. While picking up different investment options for you, they decide based on various factors. These factors include your age, investment objective, risk tolerance capacity, tax matters etc.

Following are the documents you need to present while hiring a wealth manager: 

• ID proofs
• Investment documents
• Insurance papers
• Debt-related documents
• Estate planning documents
• Tax planning documents
• Retirement planning documents

Furthermore, there are some essential documents you will need to check while choosing a wealth manager:

• ID proof
• Bachelor's degree in fields like business finance or economics.
• Earlier experience in financial service
• CFA certification

Following are the mistakes to avoid while choosing a wealth manager:

• Not Checking Credentials of Advisor

The most typical mistake that individuals make while hiring a financial advisor is that they do not verify the qualifications and credentials of the advisors thoroughly. While you are searching for an individual whom you may trust, it is essential to make sure that they are skilled enough and certified to bestow financial advice.

Not verifying an advisor's credentials or hiring anyone who is not certified can make you face financial losses. Additionally, hiring an amateur financial advisor may expose you to legal liability.

• Hiring Someone Who Uses a Stereotype Plan

While choosing a wealth manager, you need to communicate with their other customers to get reviews about their services. If you figure out that person is providing similar advice to everyone, you are recommended to step back and take assistance from another financial advisor.

• Not Asking Enough Questions

Often, individuals make mistakes by not asking enough questions to their wealth managers while hiring them. Thus, it is essential to question your advisor to figure out their perspective and approach to how you will invest your money. So, before you hire a wealth manager, note down a list of some relevant questions to ask them.

• Blindly Following a Wealth Manager

Remember that your financial advisor is carrying out your tasks. Since the entire process is related to your money, just do not accept everything that the manager is executing or about to implement as the ideal move. Hence, you should not blindly follow their decisions. Instead, conduct internet research or question them whenever you feel doubtful. 

• Failing to Form a Professional Relationship

Make sure you do not feel daunted by a wealth manager. So, you should feel relaxed while discussing your wealth and finances openly with them. Whenever you feel suspicious, it is sensible to clarify directly. If there is a lack of professional communication, look for someone else.

From the above discussions, you can understand how to choose a wealth manager to get the most out of your investments. Make sure to follow the guidelines above with diligence to get to an advisor who will work for you as your trusted investment manager.