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Wealth management is a financial advisory service that is provided to affluent, high net worth and ultra-high net worth individuals. The advisor collects information about the client’s needs and makes a personalized strategy that helps in preserving and growing wealth and passing it to family members taking into consideration the prevalent taxes and wishes of the family.
Wealth management is suitable for wealthy persons and aims for wealth protection, tax planning, estate planning, joint decision making by the family with a common mission, succession planning, and if required philanthropic activities. There has been an increase in the number of high net worth individuals in the last few decades. They demand a greater level of product offerings and financial services and the advisor tries to deliver all these services.
Generally, wealth managers provide service across the spectrum of the financial field but some wealth management services specialize in some areas depending on the skills of the wealth manager and the main business in which they operate. In reality, the financial advisor delivers the services they are most well versed and efficient with. The wealth management advisors that work for an investment firm due to their years of experience have more knowledge on the investment part while those working for a bank are more knowledgeable on estate planning, insurance, loans, and other credit options.
The wealth manager creates the plan taking into account the needs of their client and can take advice from outside experts as well as the client’s own professionals like the accountant or the lawyer. When a client takes services of a wealth management firm he may receive advice from a single wealth manager or a complete team of experts. Wealth management services can be provided by financial advisors, portfolio managers, stockbrokers, and banks.
Wealth Management fee-
The wealth management firms charge their client and have a fee structure and the most common one is charging a percentage of the assets managed. It could annually be 1-2% of the total investment sum of the client’s account that is managed. This fee decreases as the assets under management increase and for larger accounts can be negotiated.
Other wealth management firms charge an hourly rate for their services and if you have simple needs, you will be able to save some money. The fee-based advisors can also work on a combination of fees plus commissions.
The fee of the wealth management firm would cover the investment advice, cost of transactions in the account, account maintenance, and the reporting fee. Other times it will cover only the work done in managing investments and a client would have to pay separately for account maintenance.
The wealth managers from banks and other financial institutions include investment solutions across asset class that goes as follows –
Equity: Direct equity, mutual funds, ETFs, and portfolio management services.
Debt: Debt mutual funds, non-convertible debentures, bonds.
Alternate Assets: Listed equity, private equity, and real estate funds.
Gold: Physical gold, mutual funds, ETFs.
Legacy Planning: The wealth management firms assist in the creation of a will and estate planning.
The complete investment process is-
- The wealth managers meet the client to study their goals, life stage and risk tolerance. This helps in creation of the financial plan.
- A tailor-made financial plan is made based on the risk profile and the right asset allocation across various asset classes.
- The wealth manager and his team execute the plan.
- The wealth manager and his team monitor the performance of the plan including performance of individual products. If some changes are required the investment plan is fine tuned to meet the objectives of the plan.
A financial advisor or a wealth manager; what is your requirement?
A financial advisor helps the client with a wide range of financial services and in some cases may offer advice on one of the financial services like insurance or estate planning.
Wealth managers are a type of financial advisors and what stands them apart is the services that they provide to high-net-worth individuals or ultra-high net worth individuals. They offer many services under one advisory package.
A person can take the help of a financial advisor or a wealth manager depending on his financial situation. If a person has a large amount of wealth he can consider a wealth manager. Some wealth management services have a minimum asset requirement for clients before they provide services.
The future of wealth management industry-
It is estimated that the global wealth management industry that had a market size of $1.25 trillion in 2020 is expected to grow to $3.43 trillion by 2030. The developing economies and emerging economies like China, India, Indonesia, Malaysia, Taiwan, and the Philippines offer significant scope for growth as several high net worth and ultra-high net worth individuals are now demanding wealth management products. Some of the big players in the global market are:
- UBS.
- Bank of America Merrill Lynch.
- Morgan Stanley.
- Credit Suisse.
- JP Morgan Private Bank.
- Citi Private Bank.
- BNP Paribas.
- Goldman Sachs.
- Julius Baer Group.
The Indian wealth management Industry-
The fast-growing Indian economy and the rising per capita income are assisting in the growth of the wealth management industry. The wealth of a number of people is on the rise and it is estimated that 80% of the Indian population will fall into the middle class by 2030. A large disposable income of the middle class will further fuel the growth of the wealth management industry. Traditional assets like fixed deposits offer less returns and are not even able to beat inflation. So people would be investing in alternate asset classes offering higher returns.
The top 5 wealth management companies in India are:
- Kotak Wealth Management.
- ICICI Bank Private Banking.
- IIFL Wealth and Asset Management.
- Edelweiss Wealth Management.
- BNP Paribas Wealth Management.
Advantages of wealth management services-
- Wealth managers have tailor made financial plans for their clients.
- When you take the services of a wealth management firm you are assured of the services of experts; like there would be expert on taxation, investments, superannuation, estate planning. These experts will help you to reach your financial goals.
- Since the financial experts are making plans for you it removes some of your stress. You will have to only implement their plan and they would advise on course correction if necessary.
- The wealth managers provide personalized financial services taking into consideration your personal requirements. You can reach out to them anytime and a relationship is developed leading to a better exchange of ideas and moving towards financial goals.
If you are a high net worth or ultra-high net worth individual; taking the services of a wealth management firm is a good idea to manage your wealth, help it grow, and reach financial objectives. Outsourcing the financial services to a wealth manager would help you concentrate on your profession or business field, with the wealth manager taking care of the growth of your financial assets.