By Rene J. Zarate, CPA, ABV

Wealth management entails the preparation and execution of a plan that addresses a person/couple’s (“investor”) current and future needs for income and asset growth. The planner should consider the amount of risk the investor is willing to take, the age and health of the investor, what their income needs are, and what, if anything, the investor wants to leave behind for heirs or charity. All sources of income and assets owned by the investor should be considered by a planner, even if they are not actively involved with the investor’s entire estate. The strategic placement of assets in investment vehicles that support these investment goals, both short term and long term, is the primary service the planner should deliver, in a cost-effective way.

As CPAs, we are often most intimate with the financial world of investors, in that they all must file tax returns. The CPA professional who is paying attention should be aware of the client’s balance sheet, assets owned along with any liabilities, as well as the sources of income. These are the items the planner will use as the foundation for investing, matched with the investment goals.  

Today’s planners can leverage technology to practice in many forms. Unlike in the past, they can purchase both research and trade executions at reasonable costs. This allows them to choose to be part of large investment houses, insurance companies, CPA firms, or to start their own boutique firms. Costs to clients/investors are very competitive, usually depending on asset size and how the assets are invested. They typically have access to institutional classes of Mutual Funds that retail investors cannot purchase.  Depending on the portfolio size, the planner may also have access to separately managed accounts (SMAs), which are like private mutual funds with limited access, usually catering to a specific style of investing – Growth, Value, Large Cap, etc. Overall, their job is to manage the managers, keeping an eye on the investor’s goals, and make sure the investment vehicles are true to their advertising. There are some planners who manage their own custom portfolio. Some are very good at it, but it can get tricky. These professionals may place themselves in the position of supervising themselves. 

Over my career I have participated in a multitude of presentations by wealth managers to their clients.  I have found that most of them are technically competent. The investor cannot presume they will be so, and the CPA is frequently in a good position to provide important feedback and insight. We usually can offer advice based on the history we or our colleagues have with the managers.  As a rule, the analysis of a planner’s competency occurs before the investor meets them. The presentation/proposal process that takes place prior to hiring a planner should be designed to determine how well the planner listens to the needs of the investor and how they plan to meet the needs of the investor.  

So, how does someone determine if a wealth manager is appropriate for their needs, and, if so, how do they decide who to hire? Costs are always a factor, but, as I indicated earlier, today’s market is very competitive. Planners know that their pricing must consider that investors can simply invest in no-load mutual funds. Why pay a planner at all? We pay a wealth manager to keep our investment life in order, disciplined, and tuned in to what the markets are doing. So, when the decision is made to hire an investment planner, consider the following:

  • Are they technically competent?
  • Are they cost competitive?
  • Do their incentives align with the investors?
  • Do they communicate well with the investor, meaning both parties if a couple?
  • What is their succession plan?  
  • Will you be looking for an advisor again after you retire?

Finally, my experience with wealth manager selection goes back 30 years. The business has changed, become much more competitive and cost conscious, and accessible to smaller investors. Today, investment options are in play that many years ago were only available to the ultra wealthy. When the time comes to begin planning, with the average life span longer than ever before, it will be wise to include your CPA. Their advice on technical competence and costs in the market are helpful. I have found that in the final assessment, after considering those things, who you are most confident and comfortable with will not steer you wrong.

One final tip based on experience – once retirement is imminent, plan to maintain a significant amount of cash available for monthly costs during market corrections. A trusted advisor once offered that I should have three years of costs on hand. Based on the craziness we are all currently experiencing, I cannot recommend otherwise. 

If you would like to discuss your wealth management needs with me or one of our experienced CPAs, please contact us at (813) 875-7774. 

About the Author

Rene Zarate

Rene J Zarate CPA/ABV is a Director with Rivero Gordimer Valuation & Advisory Services. He has advised many owners of small and midsized Companies with perhaps the greatest financial decision they faced.   Mr. Zarate is available for consultation when that contact arrives.

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