How to Choose a Wealth Management Firm

Guess how much money is managed by wealth management firms in Canada? Nearly $200 billion as of 2023. Meaning? Canada’s millionaires and similarly successful individuals see value in hiring a wealth management firm to take care of their finances and preserve their wealth. But today, you have tons of options for wealth management firms to choose from — too many options. Then, you’re left wondering how to choose a wealth management firm correctly. We’ll walk you through a few wealth management basics before diving deep into how to choose a wealth management firm that best suits your financial goals and values. Continue reading to learn more!

What is the difference between wealth management and financial advisor?

Financial planning, estate planning, asset management, wealth management — these are all common financial services that get lumped together, but it’s easy to forget the distinctions. 

Wealth managers have a fiduciary responsibility to their clients, meaning they must provide advice and services in the best interest of their clients. Wealth managers are Certified Financial Planners (CFPs), and often Chartered Investment Managers (CIM). They might also hold a few other designations specific to tax and estate planning. 

But what’s the main difference between a wealth manager and a financial planner? The clientele. Wealth managers usually service clients with a minimum $1 million net worth, while anyone can hire a financial planner or advisor. In addition, financial planners and advisors tend to offer their services to those with lower net worth and with an “a la carte” style. In other words, you pay for the specific service you need may it be help with filing taxes or financially navigating a new phase of life, such as starting a family. Whereas wealth managers typically manage an entire portfolio of wealth in bulk.

But wouldn’t wealth management simply be asset management? Not quite. Asset management is the general management of investments in different funds, while wealth management offers a more holistic strategy to preserve your wealth via tax-advantaged accounts, personal consultation, and estate planning that considers your unique values and financial goals. 

How much money do you need to use a wealth management firm?

It depends. Charlie Sims, a CEO at Toronto-based Cumberland Wealth, tells the Globe and Mail that most firms look for clients in the $1 million to $5 million net worth range. But that doesn’t mean you can’t use a wealth management firm or independent wealth manager earlier. Some firms serve clients with lower net worth, provided they meet other specific criteria. Our take? Wealth management serves you best if you start as early as possible. That’s why we sift through tons of wealth managers based on performance, ratings, and eligibility criteria before recommending them to thousands of Canadians each year like yourself. 

What percentage does a wealth manager take?

A wealth manager usually takes around 1% of your overall assets as a base management fee. On top of that, they might charge administrative fees and other miscellaneous charges that you should confirm before starting to work with them. Remember to read the fine print!

How do you evaluate a wealth manager?

Here are some general items to look at when evaluating a wealth manager: 

• Testimonials and referrals: What are clients saying about the firm’s professionalism, services, and performance?
• Fee structure: Look at base management fees and other administrative costs. 
• Client and employee retention rates: If a firm has a revolving door of wealth managers, that might indicate a lack of alignment that could leak into the service. Plus, client retention rates should be high to reflect the natural long-term relationship of a client with a wealth manager. 
• Performance history and returns: Review performance reports and consider the historical returns for each fund a firm recommends to you. 
• Assets under management (AUM): Assess how much the firm is managing — big numbers of AUM indicate greater trust and reputation for the firm, though more boutique, smaller firms can still offer a great service. 
• Management credentials and expertise: Look for management teams with a minimum of Certified Financial Planner (CFP) and Chartered Investment Manager (CIM) designations. 

Ready to pick a wealth management firm? Let’s dive deeper into the questions you should be asking and more items to look out for. 

Tips on how to choose a wealth management firm

Maybe you’re choosing between three different wealth management firms. Here’s the thing: they all come highly recommended — so how do you choose? 

Wealth management services are similar across different firms, but one firm might reflect your unique financial goals and values more than the other. Plus, some firms might have more experience supporting clients more similar to you. 

Here are a few tips for choosing the best wealth management firm for you: 

1. Ask them about their ideal client

And if you don’t fit those parameters? It might not be a strong fit. For example, some wealth management firms prefer to serve clients that have a minimum $1 million net worth. 

Another example could be your type of work and life stage. You might be a successful entrepreneur in your early 30s, and a firm might have most of their experience supporting the 60+ crowd in primarily estate planning. Now, that doesn’t mean they won’t serve you. But it could mean their experience isn’t as robust for clients in your unique financial scenario. 

Plus, you might feel neglected because wealth management firms naturally tend to focus more attention on the clients that bring them the most revenue. This ties into assets under management (AUM), where firms dedicate more time and services to clients with more significant space in their AUM. In most cases, their profits are directly linked to the size and growth of your portfolio.

Wealth Management Canada connects thousands of Canadians with wealth managers — but before we recommend one to you, we assess your complete financial scenario with a questionnaire and make tailored, personalized recommendations. 

2. Review returns and performance for specific funds

A wealth management firm might recommend any number of funds for you to invest your wealth into. 

Take a close look at the performance track record and historical returns of those funds. Don’t jump at the high returns of a relatively new fund — it might have a riskier investment model and strategy that can’t reasonably predict returns in the long term. 

Take a look at a fund’s periodic downfalls and assess them in comparison with the overall market. Notice anything that stands out? Dive deeper and don’t feel nervous to ask the firm questions about it.

Fun fact? A wealth management firm should have a significant portion of their own wealth invested in the funds they recommend. If not? That’s a question worth asking too. 

3. Assess fees

Most wealth management firms charge clients management fees in two ways: 

• Percentage of assets: 1% of common
• Fixed fee for services: Ranges anywhere from $1,000 to $10,000+

Both have their pros and cons. Percentage-based fee structures are generally more favourable, however, because they indicate a wealth management firm’s interest in growing your wealth. Their success is directly linked to yours. 

Be wary of wealth managers that receive commissions from selling you specific financial products. Talk about conflict of interest! Still, combine this information with other items on our list, like client testimonials, which might justify and back a firm’s fee structure. 

Don’t forget to review other fees like custodial and administrative costs, investment fees, capital gains, and carryforwards.  

4. Talk to existing and past clients

Learn about the firm’s reputation from the eyes of their clients. A good start is to look at online reviews and testimonials. But we’d recommend digging a little deeper. 

In your initial consultations, ask for references from existing clients, and try to find out what their client retention rate is. If you notice a surplus of new clients, that’s not always the best sign. Why? Because the best wealth management firms retain clients for decades and evolve their services with your financial goals and scenario. 

Pssst. Looking for honest reviews and ratings to help you decide on a wealth manager? Wealth Management Canada has a whole roster of certified and rated wealth managers for you to pick from.  

5. Trust your gut

Do you feel confident in your wealth manager? How do you feel when talking to them? Do they have a solid handle on your financial goals and values? Do you trust them to make decisions that will support your financial future? 

Listen to your instincts here. Wealth management firms aim to have long-term relationships with their clients — so you should feel good around them. Another indication of fit is the structure of their services. Specifically, the level of communication and consulting they’ll have with you throughout your relationship. 

Will they reach out for regular meetings? Do you have regular access to talk to your wealth manager? These items might feel small at first glance, but they really shape the relationship you’ll have with your wealth manager. 

Are wealth management firms worth it?

Is preserving and growing your wealth worth it? Then so are wealth management firms. Once you hit the million-dollar mark, your finances become a bit more tricky to manage under your specific values and financial goals. Plus, you’re dealing with greater tax obligations that can sink into the hard work you’ve put in to generate your wealth over the years. 

That’s where a wealth manager comes in. They provide a wide range of financial services dedicated to preserving and growing your wealth in the way you want to see your financial future shape up. 

Now that you know how to choose a wealth management firm, it’s time to take control of your wealth and finances. Ready to reach your financial goals? Book a call with a wealth manager today!

Read More: Tips to Find a Wealth Manager