Wealth Management 101: Everything You Need To Know

Personal Finance

Wealth management is an exclusive form of financial management that combines financial and investment advice, legal and estate planning and tax and accounting services. Such services are extended by financial services firms or credentialed specialists, such as CFAs or CAs, to individuals with high net worth. The roaring economy and subsequent increase in income levels have increased the demand for wealth management services. The massive chunks of money that these individuals make need to be managed cautiously. This is why wealth management is becoming a sought-after service in India.

Go through the following sections to know the features of wealth management and how it works.

How does Wealth Management Work?

In simple terms, wealth management is a form of financial advisory provided to companies and individuals for proper management of financial matters. These could include taxation, investment, estate planning and much more.

Specifically, wealth management strategies lie in the preservation of funds for the long term. Thus, the entire process is conducted as follows:

• The first and foremost step for the wealth manager is to determine your financial goals, risk appetite and investment horizon.
• In the second step, he/she devises a strategic plan for you. This step involves suggesting the correct strategies while considering your ongoing tax liabilities, liquidity concerns and previous and current investments.
• Next up, the wealth manager executes the plan. Your money gets invested in a preferred financial instrument, and the wealth manager implements your investment strategy.
• In the last step, your wealth manager undertakes subsequent modifications and evaluations of your plan as your needs and preferences change.

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What are the Features of Wealth Management?

As mentioned earlier, wealth management services are preferred by individuals with a substantial net worth. Many HNWIs feature complicated overseas assets, which makes it necessary for them to utilise such professional services. 

That said, here are a few distinctive features of wealth management:

• It is a tailor-made service which is specific to a client. Thus, the investment strategies and products are suggested as per your preferences. A wealth manager carefully considers your risk appetite, investment horizon, liabilities and assets before deciding.
• A wealth manager’s job goes far beyond financial advice. Instead, they provide various other services, such as locating opportunities to create more wealth, revisiting your plans regularly, and more.
• This service also takes in various aspects to align your family’s financial needs. Some of the duties that a wealth manager performs in this regard include retirement planning, tax management, insurance planning and more.

What are the Objectives of Wealth Management?

Wealth management features a consultative process. It includes consultation with clients for discussions relating to their financial goals.

The primary objectives of wealth management services offered to individuals and companies include the following:

• Venture capital investment
• Derivatives hedging
• Real estate planning
• Stock options planning

What are Wealth Management Strategies?

Wealth management includes a lot more than just financial planning. It deals with every other financial aspect of high-net-worth individuals. 

That said, mentioned below are a few strategies that wealth managers follow:

• Analysing risk
  Risk analysis includes assessing the risk tolerance capacity of a client concerning his/her finances. A few factors that determine this include investment objective, client’s personality, future and current responsibilities and more. A wealth manager considers these and many other factors to clearly understand a client’s risk appetite.

• Asset allocation
  This step includes creating a suitable allocation plan to ensure applicability to the risk-reward need of a client. This maximises the return from investments while the wealth manager manages the overall portfolio risk.

• Choosing investment products
  Wealth managers in India work closely with leading banks that ensure the availability of various investment instruments. However, wealth managers often seek the discovery of specialised investment avenues beyond these availabilities. These specialised instruments vary from client to client and feature significant customisation.

• Plan execution and research
  A wealth manager also keeps a close watch on the performance of different investments. In most cases, clients receive constant qualitative and quantitative reports that mention whether the portfolio is correctly executed. This is an important strategy, considering that investing consists of risk. 

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What are the Benefits of Wealth Management?

India’s high net worth segment is growing rapidly, resulting in an increase in demand for wealth management services. These services offer a host of benefits, which include:

• Provides a systematic financial plan
  When you seek a wealth management service, the advisor helps you attain a strategic financial plan. Through proper advisory, you can create wealth over the long term systematically. This way, wealth management services help in formulating a systematic financial plan.

• Eliminates financial stress
  Through their knowledge and expertise, wealth managers help clients understand financial uncertainties. They also assist in making critical decisions when the time arises. This way, they help individuals manage their financial decisions even during fluctuating market conditions. This results in reduced stress and better financial decisions.

• Extends a flexible investment strategy
  Wealth managers continuously devise investment strategies for the betterment of clients. Thus, they offer a flexible financial approach as per your financial needs and requirements. A wealth manager considers market conditions and market categories at the same time. This helps them create a route through market ups and downs, resulting in better investment decisions.

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Final Word

Evidently, availing wealth management services from professionals extends a myriad of benefits to individuals and companies. The growing rise in these services is the beginning of a boom that the industry is yet to witness.

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.