How to Choose a Wealth Manager in Charlottesville, Virginia

By Jennifer L. King
Chief Executive Officer, Corporate Secretary & Director, and Chief Compliance Officer

Choosing a wealth manager is a complicated process and selecting one firm from the thousands of boutique and national firms may seem overwhelming.

One of the most important aspects of hiring a manager is finding an individual or team who is aligned with your specific needs.

If you’re seeking insurance help, it doesn’t make sense to hire a stockbroker. If you need estate planning, you wouldn’t hire an insurance agent. The first step is to consider what problems you’re looking to solve. In our experience, wealth management challenges fall into three categories:

• Investments: saving for retirement, saving for college, generating retirement income
• Estate planning: trusts, wills, gifting and estate taxation.
• Insurance: life insurance, disability insurance, annuities and umbrella insurance.

Once you’ve decided on the help you need, you can then study the different types of managers. Several questions may help with your selection.

1. Where is the firm based. Do local or out of town money managers make decisions for me?
2. What are your fees and how do you disclose them?
3. What’s in the manager’s investment style and process and will you be comfortable with it.
4. Are you a fiduciary? Fiduciary advisers are required to client ahead of their own. It is the highest standard for wealth managers and investment advisers.
5. What types of assets is the manager recommending and why?
6. What happens to my money if you leave the firm?
7. Do you incorporate tax strategy into wealth management?

1: Do local or out of town money managers make decisions for me?

If you’re paying for investment advice, you want a manager who is aligned to your needs, rather than managers who design cookie-cutter portfolios in New York or San Francisco or elsewhere. Local managers are more likely to demonstrate sensitivity to your concerns because they are connected to the community and interact with you and other clients.

If in-person meetings are important to you, living within driving distance of your adviser makes sense. If you live in Lynchburg, Virginia and you have an adviser in Charlottesville, it would be easy to drive over to Charlottesville for regular review meetings. Not every adviser is interested in meeting in person, so if a close relationship is important to you, you should make sure that you affiliate with that type of adviser.

There’s nothing wrong with out-of-town money managers making the big decisions. However, those decisions may be more rigid and less responsive to individual needs. Model portfolios are popular on Wall Street, because they allow financial advisers to serve many clients without spending a lot of time on each individual client.

But a cookie-cutter portfolio may not work out as well for you as it does for these far-away managers. You want to work with a manager who takes your individual needs into consideration when designing and managing an investment portfolio.

2: What are your fees and how do you disclose them?

This may seem obvious, but it’s a fact: all wealth managers charge fees. However, how those fees are charged isn’t always easy to understand. Many charge a fee based on assets under management. That means the adviser gets a percentage of your assets as their fee.

For example, if you have $500,000 in an investment account with an adviser and that adviser charges 1 percent, your yearly fee would be $5,000. That fee isn’t always obvious because it comes directly out of your investment balance—you don’t write check or have money directly taken out of your checking account.

In addition to the assets under management fee, many advisers use mutual funds, exchange traded funds or other products that also charge underlying fees. That translates to an additional ongoing fee on top of the assets under management fee. For example, if your adviser charges a 1 percent fee and invests your assets in mutual funds with an average fee of .75 percent, the fee on that same $500,000 portfolio would be $8,750 — $3,750 higher.

Advisers may also charge commissions. An example is a mutual fund with a front-end load, usually in the range of five percent. Commissions may replace or be in addition to asset under management fees. The best way to understand fees is to ask questions until you’re sure what you’d be paying.

3: What’s your investment style and process?

The wealth manager you hire should possess an investment strategy that aligns with your goals. For example, if you want to grow and protect your retirement savings, you don’t want to go with an aggressive manager or one who is too conservative.

There are a variety of investment approaches: aggressive growth, growth and income, conservative income, and so on. Some wealth managers offer a spectrum of styles designed to accommodate investors in a variety of stages. One of the most important aspects of an adviser’s investment style is how well you understand that style. If you don’t understand the style after an adviser has attempted to explain it to you, that’s a red flag. You need to understand how your money is going to be invested.

4: Are you a fiduciary?

Fiduciary advisers are required to put your interests ahead of their own. It is the highest standard for wealth managers and investment advisers.

Many advisers work under a different standard, known as the best interest standard. The best interest standard means that advisers must make investment recommendations that are in the best interest of their clients.

These standards can seem confusing. Here is the key difference: the fiduciary obligation applies to the entirety of an adviser’s relationship with a client, while the best interest standard applies only at the time of a specific recommendation.

Why is the fiduciary standard superior? Because it applies to every aspect of your relationship with your wealth manager. You want a wealth manager who always puts your interests first.

5: What types of assets do you recommend and why?

It’s crucial to understand whether an adviser is limited to one type of product or works with and can recommend the products that are best for you. For example, insurance agents frequently recommend annuities. Why? Because that’s the only investment product they can sell. Many insurance agents aren’t licensed to sell securities such as stocks, bonds and mutual funds.

An annuity may or may not be right for you, but you don’t want to limit yourself to a wealth manager who is a one-trick pony. You want to make sure that any adviser you hire has the ability and the flexibility to meet your needs and goals.

6: What happens to my money if you leave the firm?

You need to know what would happen to your hard-earned money if your adviser left for another firm, retried, or passed away. If you hire an adviser who is part of a team, then you can rest easy. Team managers practice a joint strategy that means that if one manager leaves the firm, the other managers seamlessly move forward with that strategy.

If you’re thinking about hiring a solo adviser, this could still work out if your adviser has a solid succession plan. Perhaps they have an arrangement with another adviser who practices a similar strategy who would take over your account in the event of unfortunate circumstances.

When a wealth manager has an ownership interest in a firm, that manager is more likely to ensure that there is a succession plan in place. That succession plan could involve other managers already affiliated with the firm, or a relationship with an outside manager with a similar philosophy.

7: How do you incorporate tax strategy into wealth management?

While taxes may not be a predominant concern in investing, they are important. Hiring a wealth manager with tax sensitivity can make a difference in building your wealth. You don’t want to pay taxes unnecessarily.

For example, a wealth manager could delay selling a stock with a gain in a taxable account, turning a short-term capital gain into a long-term capital gain. That could make a considerable difference in how much of the gain is taxable, as short-term gains are taxed at ordinary income rates whereas capital gains are taxed at rates between zero and 20 percent.

A Final Word

Once you get the answers to these questions, you’ll most likely have a good idea of the best advisory fit for you. While hiring a wealth manager isn’t a life and death matter, it’s important to work with a wealth manager who understands your objectives, must put your interests first and invests in a way that you understand.

About Chase Investment Counsel

Chase Investment Counsel is a family and employee-owned boutique wealth management firm that offers personalized investment services. Our clients include career professionals, those nearing or in retirement, and families experiencing financial transitions such as generational wealth transfer, widowhood, divorce or sale of a business. Chase’s active, disciplined investment management team is focused on selecting individual stocks and bonds targeted to each investor’s specific financial goals and risk tolerance. Established in 1957 in Charlottesville, VA, Chase Investment Counsel manages approximately $300 million in assets.

About Jennifer L. King, IACCP®

Jennifer King is Chief Executive Officer, Corporate Secretary & Director, and Chief Compliance Officer of Chase Investment Counsel. Jennifer earned a BS in commerce from the University of Virginia in 1992 and an MBA from James Madison University in 1997. She is an NRS Investment Adviser Certified Compliance Professional® and is responsible for the firm’s compliance program. In addition, she handles operations and administration for the firm, including supervising performance measurement, client investment record keeping and reporting. She also manages client relations related to those functions and supervises the maintenance of our performance measurement software. Jennifer is a past president of the Rotary Club of Charlottesville and a Director of The Center, a local non-profit providing opportunities for healthy aging in the community. Contact: 434-293-9104 x103 or [email protected]