How do you go about hiring someone to do your investing for you? Tread carefully and be sure to read the small print. David Prosser provides a primer
Analysis
Could a wealth manager help you pick a path through economic and political volatility to arrive at a brighter financial future? That is the sales pitch of the wealth-management sector, which wants to take responsibility for investing your money and supporting you with your broader financial goals.
“What you’re getting is a much more integrated approach to your entire wealth,” says Jason Hollands, a managing director at Evelyn Partners, now the UK’s biggest wealth manager. Compared with, say, a high-street financial adviser, wealth managers promise something more holistic. “You’ll get a bespoke investment solution, as well as a very broad range of financial planning services,” Hollands explains.
In this utopia, your wealth manager should take the time to understand every aspect of your family’s financial goals, select an appropriate range of products and services, and run an investment portfolio on your behalf that gives you the best chance of achieving all your ambitions without subjecting you to undue risk.
Is there a catch? One potential stumbling block is exclusivity. Wealth managers are looking for clients with at least £200,000-£250,000 to invest. Some firms will take on clients with smaller sums, but the economics of this market are more challenging. It is also a segment increasingly well served by digital wealth-management services – the so-called “robo-advisers”, including Nutmeg, Moneyfarm and Wealthify.
Another concern is cost. You’ll get personal service from an individual investment manager or financial planner, with face-to-face meetings in person or by video conference if you prefer. But you will pay for this level of attention. Firstly, most wealth managers charge by taking annual percentage fees out of your portfolio – often on a sliding scale, with costs reduced on larger portfolios. Think of 0.5%-1% as pretty typical for a £200,000 portfolio, falling to as little as 0.25% for portfolio values above £2m.
Beware additional fees
In addition, you’ll need to be conscious of any additional charges on underlying investments and trades, for example, but also fees for advisers’ support with financial planning. That could be anything from advice on retirement to tax and estate planning. Some firms can also
