#17 What makes a good wealth manager?

Transparency as a key criterion

Choosing a wealth manager is an important decision for every investor. What makes a good wealth manager? One of the most important criteria is transparency. Once the wealth manager has discussed your risk appetite with you, they should provide you with an investment proposal tailored to your risk appetite. This proposal should not only include the recommended investment instruments, but should also transparently show the costs or TER of these instruments. The Total Expense Ratio (TER) indicates the total costs associated with holding these instruments. Transparent disclosure of these costs is essential, as they can have a direct impact on your return.

Retrocessions and potential conflicts of interest

Another important aspect when evaluating a wealth manager is retrocessions (retro for short). These retrocessions, which a wealth manager receives from providers when using their investment instruments, can lead to conflicts of interest. The question is what the wealth manager does with these retrocessions. Does he keep them for himself or does he pass them on to the investor? Retrocessions can tempt the wealth manager not to select the best investment instruments impartially, but rather those that are more advantageous to him personally. This is particularly true if the wealth manager uses his own investment products, which can represent a similar conflict of interest.

The importance of hidden costs

In addition to the obvious costs, it is often the hidden fees that have a significant impact on returns. One item that is often overlooked is the FX markups that are incurred on foreign exchange transactions. These costs can have a negative impact on returns with every transaction and it is important that the wealth manager provides full transparency here. Regardless of whether they work with a bank or not, it is important to know what the foreign exchange fees are.

Better returns thanks to more transparency

The question remains as to whether a transparent wealth manager who waives retrocessions can achieve better returns in the long term. The answer may not be clear every year, but transparency is an indicator that the wealth manager wants to keep costs low and avoid conflicts of interest. In the long term, this increases the chances of a better return compared to wealth managers who do not operate transparently.

The three cornerstones of successful wealth management

Overall, transparency, the disclosure of all costs and the avoidance of potential conflicts of interest are decisive factors when selecting a wealth manager. Make sure that your wealth manager not only promises good returns, but also offers clear transparency on all aspects of the investment strategy.

What is your personal experience with wealth managers? Does your wealth manager show you what is in your portfolio? Does he tell you the TER? Do they take retrocessions and if so, do they give them back to you? Send me an e-mail with your experiences.