Like financial planning, wealth management is also a branch of financial management, with the latter being a wider concept than former. Wealth management is specialised advisory services which deals with investment needs and planning for wealthy clients. It involves series of consultations between wealthy clients and the advisors to the know the clients’ financial goals by discussing and understanding various factors such as family background, current earnings, existing investments status, consumption pattern etc. to come up with recommendations which are completely tailored to each client.
Along with the regular financial planning, wealth management also considers portfolio management and a number of other combined financial services. Wealthy investors include high net worth individuals (HNWIs), microbusiness proprietors, and families who seek the service of specialised financial advice, call upon wealth managers to assist them in coordinating their wealth with retail banking, estate planning, legal resources, tax professionals and investment management.
What are the advantages of accessing Wealth Management?
- The clients’ financial goals can be achieved by mobilising financial instruments through creating a proper wealth management plan.
- The client can avail packaged services like tax planning, investment advisory, retirement planning, estate planning, financial accounting, budgeting etc. through wealth management.
- Wealth management practices are depending upon the geographic factors, demographic factors, political and economic scenario, and saving tendency of the population.
- Usually wealth managers provide services related to all fields of finance. Some wealth managers are specialised in their area of expertise.
- The wealth managers are qualified and experience professionals. Generally, wealth management services are beneficial to high net worth individuals who have diverse investments with different goals.
- The wealth managers may cater the needs of investors individually as a small professional firm or as a part of large concern. He can even work under different designations such as financial planner, tax planner, estate planner etc.
What are the functions of a Wealth Manager?
Today, Wealth Management services are the fastest growing services in the banking sector. It is gaining popularity as it is considered as a ‘one stop service’ for all wealth investment concerns.
- Investment planning function: Wealth managers prepare specific tailor-made financial plan for each client to cater the present and future financial needs. It also encompasses the distribution of asset management of a whole portfolio as well as selection of individual securities.
- Tax Planning function: A small difference in tax change may bring about substantial change in post-tax returns, while managing huge amount of investment pool, as various types of investments are taxed at different rates by tax authorities. Wealth managers should help their clients in selection of number of financial products to preserve their wealth by creating most tax efficient portfolio.
- Trust and estate planning function: It is a process of estimating and arranging for the disposal of an estate. Wealth managers must educate the clients about the will, powers and duties of clients and beneficiaries, rights of survivorship and power of attorney. More advance estate plans may even cover complying or decreasing estate taxes or winding up business.
- Cash flow management function: Another important aspect of wealth management is to know the cash flow position of the client. Without having idea about how much is the cash inflow and cash outflow, it is impossible to take appropriate decision with respect to the wealth management issues. Cash flow is also a good indicator of the debt management and credit history of clients’ financial health. A balanced wealth management planning ensures to have strategies such as refinancing, debt management, debt consolidations etc.
- Fiduciary service function: A fiduciary is a person who has been entrusted with the care of another’s property or other valuables and who has a responsibility to exercise discretionary judgement in this capacity solely in the interest of this other person’s interest. (John Boatright, 2015) As an advisor, wealth managers’ duty is to be transparent, minimise the conflict of interest, act in good faith and provide all necessary facts to the clients. Also, they should put their clients’ best interest before their own.
