If you’re considering changing wealth manager because you want a different investment approach, start by identifying exactly what you dislike about your existing portfolio.
Perhaps you’re frustrated with a standard portfolio of funds, want more direct share ownership, are looking for a more active investment strategy or want access to investments your existing wealth manager doesn’t offer.
Use our wealth manager finder to compare the best wealth managers when looking for a different investment approach.
How To Choose The Best Wealth Managers When Looking For A Different Investment Approach
The best wealth manager in this situation isn’t necessarily the one with the highest historical returns. It is the firm whose investment philosophy is most closely aligned with how you want your money managed.
Understand how they actually invest
“Wealth management” can describe very different investment approaches.
Some firms build portfolios primarily using passive funds and ETFs. Others employ teams of analysts and fund managers to select individual shares, bonds and funds.
There are also wealth managers specialising in particular approaches, including income investing, sustainable investing, alternatives or more actively managed portfolios.
Ask prospective wealth managers to show you an example portfolio and explain why each type of investment is included. You should quickly get a sense of whether their approach is genuinely different from your existing manager.
Bespoke versus model portfolios
One particularly important question is whether your portfolio will genuinely be managed individually.
Many wealth managers use centralised investment models, while others construct portfolios specifically for individual clients. The FCA distinguishes between discretionary centralised models, where managers may have some flexibility, and formal Model Portfolio Services where clients generally hold the same underlying model.
Neither approach is automatically better. However, if you’re moving because you want something genuinely different, establish how much freedom your investment manager will actually have.
Active versus passive investing
You should also understand the manager’s attitude towards active and passive investing.
Active managers attempt to outperform a particular market or benchmark through investment selection, while passive investments generally aim to track an index and typically have lower management costs. Neither approach guarantees better results.
Some wealth managers combine the two, perhaps using inexpensive index funds for efficient exposure to major markets while using active managers or direct investments where they believe there are opportunities to outperform.
Access to alternative investments
Wealthier and more experienced investors may want exposure beyond conventional shares and bonds.
Depending on the wealth manager and your circumstances, this might include private equity, infrastructure, property, hedge funds or other alternative investments.
But “different” shouldn’t automatically mean “better”. Alternative and specialist investments can introduce additional costs, complexity, liquidity constraints and investment risk. Make sure you understand why an investment is being included rather than being attracted simply because it isn’t available through mainstream investment platforms.
Don’t abandon diversification
Wanting a more interesting portfolio doesn’t mean diversification stops being important.
The FCA highlights diversification across investments, markets and asset classes as an important way of reducing reliance on any individual investment.
Be particularly cautious if a new manager’s impressive historical performance has resulted from concentrated exposure to a particular market, sector or investment style.
Compare performance appropriately
If a wealth manager claims its investment approach has produced superior results, look closely at the evidence.
Ask to see long-term performance after fees and compare it against an appropriate benchmark and portfolios taking similar levels of risk.
Also look at how the strategy performed during difficult markets. A portfolio producing slightly higher returns while taking substantially more risk isn’t necessarily delivering better investment management.
Consider the cost of changing
Finally, understand what moving wealth manager will involve.
Existing investments may need to be transferred or sold, potentially creating transaction costs or tax consequences. Your new wealth manager should review your existing holdings before recommending changes rather than automatically selling everything and starting again. FCA suitability guidance specifically highlights the importance of comparing existing and proposed investments, including their costs, tax status and features.
The best wealth manager for someone looking for a different investment approach should ultimately be able to explain what they will do differently, why they believe it is appropriate for you and what additional risks and costs you will take as a result.
Changing wealth manager should be about finding a better fit for your objectives – not simply finding a more complicated portfolio.