Finance

Choosing a private wealth advisor: fiduciary duty, fees and the questions that matter

Once investable assets pass roughly $1 million, the options widen from a brokerage account to registered investment advisors, private banks, multi-family offices and trust companies. The differences in fees, incentives and legal duty are large, and most of them are not obvious from a first meeting.

Fiduciary versus suitability

A registered investment advisor (RIA) owes clients a fiduciary duty under the Investment Advisers Act of 1940: it must act in the client's best interest and disclose conflicts. A broker-dealer representative is held to Regulation Best Interest, a lower standard that still permits commission-based recommendations. Many advisors are dually registered and can switch hats within one relationship. Ask, in writing, which capacity applies to each account.

Fee structures to compare

Assets under management

Typically 0.5 to 1.25% per year, usually tiered downward above $2 to $5 million. Simple, but the fee rises with the market whether or not the advisor's work does.

Flat retainer

A fixed annual fee, common among planning-first firms. Removes the incentive to keep assets under management rather than, say, pay down a mortgage.

Hourly / project

For a second opinion or a one-time plan. Rare at private-wealth scale but useful for diligence.

Commission

Paid by the product issuer. Common in insurance and annuity sales. Legal, but a structural conflict.

Due diligence before signing

• Pull the firm's Form ADV Parts 1 and 2 from the SEC's IAPD database. Part 2 is the plain-English disclosure of fees, conflicts and disciplinary history.
• Check individual advisors on FINRA BrokerCheck and the state securities regulator.
• Confirm the custodian is a separate, well-known firm. Your money should never be held by the advisor's own company.
• Ask how the firm is paid by anyone other than you: fund revenue-sharing, insurance commissions, referral fees.
• Ask who covers you when your advisor leaves, and what the succession plan is for the firm.

When a private bank or family office makes sense

Private banks bundle lending (securities-backed lines, jumbo mortgages), trust services and investment management. They are most valuable when borrowing against a portfolio or managing complex estate structures. Multi-family offices typically begin around $20 to $30 million and add tax, bill-pay, philanthropy and family-governance services. Below those thresholds, an independent RIA plus a dedicated CPA and estate attorney is usually more cost-effective.

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