What do you know, when you hear the word ‘wealth management’? While the conventional notion is about financial planning, that is just a small part. In fact, there is a lot more to what is wealth management, than just planning your income and investments.
Wealth management, also known as private wealth management is, in fact, a goal-based plan that will allow you to sustain and grow your wealth on a long-term basis. It is an incessant investment – advisory process that includes a combination of financial planning, investment portfolio management, risk management analysis and a number of aggregated financial services. With a strategic plan, well-off individuals or prosperous businesses can achieve financial goals in a systematic manner.
How does portfolio and risk management play a role
Both portfolio and risk management play an important role, and are important elements in the spectrum of services available in investment management. Portfolio structuring and investment decisions will offer the ideal assistance to manage your investments. At the same time, the risk management will help assess the uncertainty of the future, in order to make the best possible decision. With a continuous blend of portfolio management and risk management, you can effectively anticipate and mitigate risks that can have a critical impact on your project.
Take the following for example:
Mr and Mrs Shah, a wealth couple has wealth assets that include equity mutual funds of Rs. 3 Lakhs, stocks of Rs. 32 Lakhs, PPF’s of Rs. 8 Lakhs, termed deposits of Rs. 13 Lakhs, real estate value of Rs. 1.2 crore and insurance policies of Rs. 50 Lakhs. They have financial goals they wish to achieve, both individually and together.
Private wealth management advisors made the following observations and recommendations:
• Equity portfolio was highly concentrated, with a high downside risk.
• A more diversified portfolio of at least 10 stocks were recommended, for active monitoring and 4 – 5 mutual funds of semi-active management.
• The overall portfolio allocation was made into:
o Debt: Rs. 43 lakh
o Equity: Rs. 41 lakh
o Real estate: Rs. 20 lakh
With this allocation, the overall risks were in line with the risk-taking ability of the family. Moreover, they have the means to diversify in other alternate assets, away from debt and equity. They also have the means to invest in structured products, which will ensure protection against drastic falls in equity markets for the next 4 years.
From the following example, you can see how a well-structured and precise investment management has benefited the financial future of the above-mentioned couple.
So now that you know what wealth management is, why do you need this it?
Management of your wealth is more than just investment advice. It will encompass and influence all aspects of your financial life. You may have primary financial goals or objectives that are a priority, as these goals will satisfy your needs, wants and desires. Whether it is retiring early, building your dream house, pay for your children’s higher education or pay off and be debt free, you have the choice to make your dreams come true.
And this can be made true, with the guidance and precise analysis of a wealth manger. Instead of integrating several pieces of advice from multiple specialists or professionals, you can benefit from a precise and holistic approach, that coordinates all the services and products, and customised to your requirement and goals.
A wealth manager will develop a plan that will maintain and increase your wealth based on your financial situation, risk level comfort and financial goals. Through constant communication, this custom planned with be reviewed and rebalance, throughout your lifetime. While the wealth manager will earn commission from your income, the primary and ultimate focus is on your wealth management and earnings. With such a plan in place, you can now sit back and put your financial worries away for the rest of your lifetime.