Money managers for high networth individuals come in four main shapes: private banks, independent registered investment advisers, multi-family offices and fund managers who take large separate accounts. Each charges differently, requires a different minimum and suits a different personality. This post is a Q&A on how to tell them apart and what to ask before handing over a large sum.
What does a money manager actually do?
A money manager picks and oversees the investments in your portfolio. That is narrower than a financial planner, who also deals with taxes, insurance and estate plans. Some firms do both. If you want only the investing piece, say so, because it affects price and who you should talk to.
Which types of money managers for high networth individuals exist?
| Type | What you get | Usual catch |
|---|---|---|
| Private bank | Banking, lending and investing under one roof | May push in-house products, and has account minimums |
| Independent RIA | Fee-based portfolio management with fiduciary duty | Quality varies a lot by firm |
| Multi-family office | Investments, reporting, tax and admin for several families | High minimums, often tens of millions |
| Separate account manager | A strategy run only for you, such as bonds or stocks | Narrow focus, you still need to coordinate the rest |
Minimums vary and change, so ask each firm for its current threshold rather than relying on a figure you saw online.
How much do they cost?
Most charge a percentage of the assets they manage each year. The percentage often drops as the amount grows. Ask for the all-in cost, including the underlying funds, trading charges and any separate planning fee. Look for these items:
- The management fee and its breakpoints
- Fund expense ratios, which are charged on top
- Performance fees, common in hedge funds and some private investments
- Custody and administration charges
Over twenty years, even a one percent difference in fees compounds into a substantial sum. That is why picking among money managers for high networth individuals is as much about cost as skill.
How do I judge performance?
Be careful here. Past results are not a promise of future returns, and a few good years can be luck. Ask for performance compared with a fair benchmark, after fees, over at least five to ten years and across a market downturn. Ask also whether the figures follow a recognised standard such as the Global Investment Performance Standards (GIPS).
A manager who only talks about their best fund is cherry-picking. Ask about the worst year, and how they handled it. A straight answer is a good sign.
Who holds my money?
This is the question people forget. Reputable managers keep client assets with an independent custodian, a large brokerage or bank, so you get statements directly from that firm. If the manager holds the money and issues the only statements, you carry far more risk. The Madoff case, exposed in 2008, is the textbook example of why independent custody matters.
Do they act in my interest?
Good money managers for high networth individuals are comfortable with this question, because the answer defines the relationship. A fiduciary has a legal duty to put your interest first. A salesperson has a quota. Both can be pleasant over lunch.
Ask whether the firm is a fiduciary, and whether that applies to every account. Check the firm’s Form ADV, the public disclosure document that US registered advisers file with the SEC, for fees, conflicts and disciplinary history. For brokers, use FINRA BrokerCheck. Outside the US, look up your country’s regulator.
What should the first meeting cover?
Treat the first meeting as an interview in which you are the employer. Bring a one-page summary of your finances so the conversation stays concrete, and expect the best money managers for high networth individuals to ask you more questions than you ask them.
- Your goals, income needs and time horizon.
- How much loss you could live with.
- Any large single holdings, such as company stock.
- Tax situation and who else is on your team.
- Reporting: how often, and in what format.
A manager who starts with your situation is a better bet than one who starts with a brochure.
Red flags
Guaranteed returns. Pressure to sign today. Strategies they cannot explain in plain words. A refusal to put fees in writing. Unusual secrecy. If any of these appear, walk away, however famous the firm.
A sensible way to choose
Make a shortlist of three. Compare fees, custody, minimums, fiduciary status and how well they understand your circumstances. Ask for two client references. Then sleep on it. Choosing among money managers for high networth individuals is a long relationship, and no deal is so urgent that it cannot wait a week.
If you prefer to keep control, you can also split the work: hire a flat-fee planner for advice, and hold low-cost index funds yourself. Many wealthy people do exactly that.
This is general information, not financial advice.
For background, the Wealth management article on Wikipedia is a useful starting point.
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