What is wealth management?
Wealth management has a wider scope and has long term wealth creation as its primary motive. As such, wealth management can be described as a wealth creation process where a team of professionals analyze the financial needs of the client and suggest the appropriate financial products. Such a process would include wealth protection (risk management), accumulation of wealth (growing asset base), putting your wealth to work (creation of income from such asset base) and later wealth distribution (post-retirement and succession planning).
What constitutes wealth management?
1. Identification and analysis of values and financial goals
This step consists of various other sub-steps as below.
- Asking appropriate questions which will yield what actually the client expects in the long term and also financial goals of the client.
- Testing and understanding the risk appetite of the client.
- Understanding the liquidity needs at periodic intervals or at a particular point of time.
- Understanding family values and issues thereof
- Lifestyle enhancement and maintenance concerns
- Wealth transfer and succession plans
2. Recommendation and devising plan of action
Based on step 1, where the needs and objectives of the client are analyzed and identified, the wealth manager will devise and recommend the plan of action. Such a plan will entice an appropriate mix of assets, which will be recommended for generating income as well as for long term wealth creation. This step also digs deep into the actual asset creation and allocation of these assets seeking diversification for inherent risk management. Wealth manager also analyses the position of current investments and assets of the client. The wealth manager then will address any tax or liquidity concern and will also check if there appears any gap between plan of action and current investment scenario. This plan is then consulted with the client and if he is satisfied, then the wealth manager will go on to the next step. The different wealth managers will employ different techniques and models for devising the plan of action like after tax profits model, or discounted cash flow model etc.
3. Implementing the wealth management plan
Once the plan is approved by the client, then the wealth manager documents the plan of action along with the investment strategy and asset allocation strategy. This manual also explains the income generation pattern and long term wealth creation strategy. It will also throw light on succession plans and transfer of wealth and assets. Implementing the wealth management plan will require a little while. However, this plan is revisited several times by the wealth manager to match the plan real time with happenings in the economy and financial markets.
4. Continuous evaluation and consistent communication with client
The Efficient wealth manager will evaluate the way the plan responds to the current market scenario and will try to modify it to remain updated and reap benefits from the current scenario. It may require to rebalance the portfolio and ascertain changes to the tax structure and its impact on the wealth creation. This step would ensure uninterrupted communication and consistent support to the client, which will help build rapport and trust.
Now let us see some Wealth management mistakes which you should be aware of and should avoid.
Selection of right wealth manager
Where the wealth manager is assigned portfolio management and not the whole wealth management, then he would be responsible for only that part. This will harm the synchrony and synergy effect, which would have resulted if whole wealth management was carried out by a single wealth manager. While you select the wealth manager, keep in mind to select the one who has the ability and willingness to answer the questions asked by you.
Revisiting the wealth management plan
Once implemented, your wealth management plan needs to be modified and revisited periodically. This will include asset allocation pattern, restructuring decision and liquidity analysis on the basis of the current economy and financial market status.
Asking questions and ascertaining the position of your assets at any point of time would be your duty. This will allow you to monitor and evaluate the asset allocation and accumulation. Wealth manager has to ensure that he is delivering updated information about client’s wealth by maintaining confidentiality.
Retirement or succession planning
This is a delicate issue which involves a lot of family trouble, because the property and wealth quarrels may turn bitter once the client is gone. Hence, it is important to pay attention to succession planning and retirement planning.
Now you must have got a clear idea as to what Wealth Management all about. It combines both financial planning and specialized financial services, including investment planning, estate planning, legal and tax advice, and investment management services. Better late than Never. You can now get in touch with our financial experts for your wealth management needs.
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Disclaimer: The views shared in blogs are based on personal opinion and does not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Making an investment using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.
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