We use the term ‘wealth management’ when a customer has signed an agreement with a firm to have their money or investments managed on a ‘discretionary’ or ‘advisory’ basis.
A discretionary service is where the firm manages your portfolio of investments in line with the mandate agreed with you. This means the firm will manage your portfolio without checking with you before making alterations.
An advisory service is where the firm will make recommendations based on your attitude to risk and circumstances, but you need to agree these recommendations before any changes are made to your portfolio.
In both cases, the firm has an ongoing responsibility to ensure that your investment portfolio remains suitable for your attitude to risk and investment objectives. This is different to transactional advice, where the firm is only responsible for the suitability of investments at the time that advice is given.
Accurate information is vital to enable your wealth manager to provide the service that you expect. Here are some steps you could take to ensure your details are up-to-date.
1.Speak to your wealth manager
To provide suitable investment portfolios, wealth managers need current and detailed information on your financial situation (for example, your existing savings and investments, income and financial commitments).
Make sure your wealth manager knows your latest personal circumstances. If they contact you to check whether the information they hold about you is still up-to-date, it is in your interests to let them know if your circumstances, investment objectives or risk appetite have changed in any way. Having out-of-date information may have an impact on the service you receive and you may not be getting an investment portfolio that is right for your current needs and circumstances.
2.Understand the service you have signed up to
Wealth management firms offer a range of services to customers. This could be a portfolio tailored to your individual needs, or alternatively a service where customers with similar risk appetites and investment objectives are grouped and managed together. These are just two examples of the many services available. Contact your firm to confirm the details of the service you have signed up to.
3. Be clear about your objectives
Investment portfolios should match your objectives and circumstances. Think about what you want to achieve from your portfolio and whether your wealth manager understands this. For example, are you looking to generate a regular level of income or achieve a particular level of growth in the value of your portfolio, and over what period of time?
4.Understand the risks
Wealth managers will need to have an in-depth understanding of the level of risk you are willing to take, as well as the extent of any losses you could afford to suffer. The investments within your portfolio(s) may involve a variety of risks, including the type of investments you hold and where in the world your money is invested.
You should also let your wealth manager know if and when you may want to access part or all of your money. As some investments may take longer to be cashed in, this will be an important factor when building your investment portfolio.
5.Know what you are being charged
Some wealth managers charge for their service through an annual management charge (usually a percentage of the value of your portfolio). Others may charge through commission on each trade that they carry out. There are also some wealth managers that charge through a combination of an annual management charge and commission.
Make sure that you know how your wealth manager is charging for the service that is being provided. Ensure you also know how important information about your portfolio, such as details of your holdings and their performance, will be reported to you and when.
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