Conventions and Rules of Wealth Management
The financial specialists deal with all the financial assets
to their clients. A lot of individuals as well as companies seek for wealth
management services, in order to increase their profits, which is obviously
their ultimate goal. The word Wealth Management is defined as a professional service which offers to give
investment, financial planning guidance in addition to any required help with
regards to finance related issues. It is usually given to clients who have high
net worth and also to business owners. These people generally ask professional
financial specialists to give financial adviceas wealth management is
relatively simple in its most basic concept but very difficult to execute
successfully.
Wealth management services are customizable according to the needs of the clients in a legal way. These services are very advantageous for people or business who have a large number of financial assets and who need a professional help to manage them.
The wealth management services can either be provided by a separate firm that is exclusively set up for offering wealth management services or they can be offered by banks.
The clients will get to
choose what kind of service they want. They get to choose from investment
planning to financial planning to tax planning or real estate management.
In short, literally anything related to the clients’
financial issues is covered in Wealth
Management Services. There will be qualifying criteria for the
companies or individuals in order to avail these services. It may vary for
different firms and also different countries.
3 essential steps of wealth management
Usually in the case of banks, when an account holder puts in
a huge amount of cash in their bank account, the account holder gets a call
from the wealth manager of the bank explaining about different services and
products that they offer by giving some presentations.
A wealth manager follows a three step process to manage the clients’
money in the best way possible.
Step-1 of Wealth management
The first step that a Financial professional takes is to understand the client’s personal background like short term financial goals, long term financial goals and the also the risks linked up with them.
This deep
understanding will help in developing a suitable strategy which can be tailored
according to the client’s needs.
Step-2 of wealth management
Based on the understanding from step 1, the financial professional will then explain the client about different products available to choose from and they will finally end up selecting the best investment product from a range of available products.
These may include products like structured
products, investment funds, ISAs,
Equities, Bonds, Foreign Exchange
products etc.
Step-3 of wealth management
Over a period of time the client’s personal circumstances and the
market situations will change by making a better progress. Hence, it is
important for the wealth manager and the client to review the portfolio on a
regular basis to keep it in line with these changes and also the new financial
goals.
What makes wealth management more essential?
Top 10 benefits of wealth management
1. Financial Understanding
Better financial understanding can be
achieved when measurable financial goals are set, the effects of decisions
understood, and results reviewed. It will give a better approach in setting the
budget and also helps in having a control over financial lifestyle.
2. Ongoing Advice
Establishing a relationship with a
financial advisor whom one can always trust is very crucial in order to
achieving your goals. The financial
advisor will meet with the clients to assess their current financial
circumstances and develop a comprehensive plan customized for the client.
3. Cash Flow
Wealth management helps in increasing
cash flows by carefully monitoring the spending and expenses. Tax planning,
controlled spending and careful budgeting will help in making more profits.
4. Capital
An increase in cash flow, can lead to
an increase in capital. It allows in considering the investments to improve the
overall financial status.
5. Income
One can manage income more
effectively through planning. Managing income helps in understanding how much
money is needed for tax payments and other expenditures and also helps in
knowing the savings.
6. Investment
A proper financial plan will consider
all the personal burdens, objectives and risks associated with them. So having
a financial plan will act as a guide in helping to choose the right types of
investments to fulfill the needs and the goals.
7. Standard of Living
A proper financial plan will consider
all the personal burdens, objectives and risks associated with them. So having
a financial plan will act as a guide in helping to choose the right types of
investments to fulfill the needs and the goals.
8. Family Security
It provides family’s financial security which is another important bit in the process of financial planning.
It is important to have a
proper insurance coverage and policies which can provide peace of mind for
having a security for their loved ones.
9. Assets
It becomes important to determine the
real value of an asset. The knowledge of settling or cancelling the liabilities
comes with the understanding of your finances. The overall process helps in the
building of assets which don’t become a potential burden for the future.
10. Savings
Having some investments with high
liquidity is always good. These investments can be utilized in times of
emergency or for educational purposes. It helps in handling in case of some
unexpected situations.
What are some Common Mistakes in Wealth Management?
Static Objectives
As a business grows, its goals and objectives also change. It should be seen that all these changes are incorporated in the wealth management process.
It is important that wealth management objectives are revisited from time to time and are integrated with the changes in the business's objectives.
If these changes
are not brought to the notice of the wealth manager, then the business won’t be able to get better results and
profits which will damage the whole reason behind hiring a wealth manager.
Lack of Clarity
Businesses often lack to have clarity on wealth management objectives. Many of their investment decisions are reactions to the opportunities that suddenly come up.
Asset allocations are not done in a proper
manner due to these reactions. The businesses need to formulate their
collective goals and individual goals and then go with a perfect strategy
related to wealth management.
Not choosing the Right Partner
Often a lot of individuals seek expertise of various financial services providers to manage the family's investments. Many times, the products offered by the financial service providers are limited to a specific area only.
This is profitable and does not provide a wealth management solution. It is important to engage with a well-known professional wealth manager who can provide a better advice on the entire investment of the business or family.
It makes the
wealth management approach more integrated, disciplined and helps in achieving
the overall objectives on time.
Doing it alone
The family members should not think that they can handle the financial matters all by themselves. It is one of the wrong steps that are taken by a lot of people.
Wealth Management requires some specialized knowledge and skills. It is a very tough and complex process that requires a lot of time and effort for assessment of the current assets and close performance monitoring of each asset to ensure that wealth management goals are met effectively.
This requires some professional help that one must definitely hire
a wealth manager for this.
Ignoring Protection
Wealth management is considered to be about growing capital
and making profits. Amidst all of this, protection of life and assets is not
given much attention. It is important that all family members and crucial
assets of the family and business are protected under an insurance cover.
Communication Hassles
It is important that family members are clear about where the
funds are being allocated and how they are monitored. There should not be any
miscommunications between the wealth managers and family. Professional wealth
managers must be instructed to maintain confidentiality with respect to the
family's investments.
Role or duties of a wealth manager
The wealth managers will not have any direct access to the client’s money. The big banks and reputed firms do not and cannot run away with the client’s money. But for smaller firms, it is probably better to personally take care of the things, with the help of an assistant by taking suitable advice.
One can contact multiple advisors for
advice and see what is likely to be the best
Ø Interviewing the clients regarding
their financial objectives along with any potential risks involved, tax status,
insurance coverage, expenses and income. In addition, they ask questions
regarding any other information which may be relevant for the process of wealth
management.
Ø Recommending suitable strategies to
the clients regarding investment planning, insurance coverage, cash management
or any other relevant areas required to achieve the client’s financial goals.
Ø Answering any questions or doubts
that the clients may have regarding the details of financial planning and
discussion of strategies which may be suitable for implementation.
Ø Reviewing of the client’s accounts and keeping regular check
of what are the changes needed to be made, in addition to taking necessary
steps as per the review and suggestions.
Ø Analyzing the financial information
which is shared by the client and determination of strategies which are best
suited for meeting the financial objectives of the client.
Ø Implementation of the financial
recommendations or providing relevant references of individuals or firms who
can assist with the implementation of the plan, to the client.
Ø Management of the client’s portfolio and regularly updating
the client about the same.
Ø Preparation of the client’s information such as income
projections, financial document summaries and investment performance reports.
Ø Explaining the client regarding the duties of personal financial advisors
and the services which are offered by them.
Ø Contacting the client on a regular
basis for determining any changes which may have occurred in their financial
status.
Ø Guiding the clients in regards with
the gathering of the required documentation, such as wills, pension plans, life
and disability insurance records, income tax returns and bank account records.
Ø Monitoring the trends in the
financial market to ensure the effectiveness of the plans chosen for the
client.
Ø Recommendation of suitable financial
products which may include but are not limited to insurance, mutual funds,
bonds and stocks.
How wealth manager is different from investment advisor?
Wealth management is not an easy a task. Wealth managers have to be very skilled and alert as entire consequences depend upon their decisions and actions.
An investment advisor sells specific investment oriented products
whereas a wealth manager will give financial advises by assessing financial
aspects of the client.
The difference between an investment advisor and a wealth manager is that he will offer a variety of products but a wealth manager will just suggest product, by the assessing all of the issues of the client will suggest a financial product only if it helps in increasing the financial status of the client.
It is completely the
choice of the client whether to choose the product or not.
Here are some of the basic ideas that differentiate the
wealth managers from others who are providing various financial services. These
ideas help the people at least in selecting appropriate wealth managers.
What is the scope of wealth management?
The products that an investment advisor promotes have a very limited scope and there are very finite options.
Even though the wealth manager also suggests the same kind of options, he will suggest the products or offers that are not necessarily investment oriented but there will be better profits because of that.
Product promotion v/s a range of
options
The investment advisor will only talk
about the benefits of the products and promoting the products is the only main
motto for him. But in case of a wealth manager, he only suggests products which
are really useful for the clients and will just suggest it.
·
Customization
Wealth managers, kind of, build that
trust and relationship with the clients. So they can be able to deliver more
products and services to them. They have a richer understanding of each client’s personal and financial life that
will give them more options to choose from.
Wealth managers can also customize
some products and offers in order to give the clients some better life
insurance policiesbut not promote the product for any other goal line.
This content will be helpful in:
Ø Understand Financial Analysis Meaning
Ø Understanding what is Wealth
Management
Ø Know the work of Wealth Managers
Ø Opting optimum Wealth Management
Course
Ø Choose the best Wealth Management
Products
Ø Understand the work of Wealth Management Companies in
USA
Ø Understand Wealth Management in Saudi
Arabia
Ø Understand the work of Wealth
Management in UAE
Ø Understand the functioning of Wealth
Management Companies in Hong Kong
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