A Guide to Understanding Wealth Management

  • Author: sameer shaik
  • 5 min read
  • March 15, 2023
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“ Beauty lies in the eye of the beholder” 

What is wealth management? Addressing such a question is similar to answering the question, “What is beauty?” The solution is frequently stated to be from the viewpoint of the viewer. Beauty does not exist in and of itself; it is decided by the viewer. The same is true for the question, “What is wealth management?”

The term “wealth management” is often used in private client business boardrooms, trade, and popular periodicals, and by financial advisers in front of customers. Yet, most specialists struggle to define the phrase with any exactness.

When an individual from the financial services sector gets posed the query, the replies frequently differ depending on the services or products the person or organization provides. As an example, consider an insurance business whose salespeople sell insurance but promote themselves as offering wealth management. Instead, an investment business that exclusively manages your money but refers to its services as wealth management.

Firms that offer not just investment management but also a variety of additional services. These additional services include advanced planning like retirement planning, education planning, and stock options). These services also include mitigation of risk mitigation like advice on insurance advice. Estate planning and tax planning are also services provided.

When the identical subject is posed to ordinary people, the responses differ substantially for 2 reasons. People’s definitions of “wealth” differ. One person may consider Rs. 8 lacs in the bank to be affluent, whilst another may consider Rs. 80 lacs or Rs. 1 crore, or Rs.10 crore to be wealthy. Another factor is that most individuals have never considered all of the techniques that may get utilized to manage their wealth.

Also, read Best Wealth Management Tips for a Budding Millionaire.

Hence, let us look at a definition of “wealth management” that is applicable and understood by everybody.

Wealth Management Meaning? 

What is wealth management meaning?

Wealth management involves employing methods, services, and products. For what joy tho? To develop, safeguard, use, and distribute a person’s wealth. 2 things are determined by one’s wealth level. The first question is if the services and products are cheap. The second is whether one manages their money in a piecemeal fashion with a variety of separate suppliers or in a planned consultative manner.

Wealth management is described as an investment-advisory process that integrates features from several financial disciplines. Wealth management includes but is not restricted to the management of investor portfolios and financial planning. In most cases, these services are provided to smaller firms, family-owned businesses, and, most crucially, HNIs by financial services firms or licensed experts like CAs, and CFAs).

The basic purpose of the services of wealth management services is to increase current wealth over time. Wealth management services that are private get supplied to HNIs. These types are the most popular form of wealth management desired in India and throughout the world.

Wealth management is more than just sound financial advice. Yet, an entire blueprint is designed expressly for people with diverse financial goals, according to their present and future demands, such as family needs. Wealth managers often operate with large or small organizations, representing their customers at various levels of the financial markets. Wealth management is practiced by any individual or company that has a financial objective or wishes to attain financial independence in the long term.

Wealth Management Example?

What is Wealth Management Example? 

Consider the case of Joe, who has a sizable net worth. Joe owns a stake in two enterprises and has $5 million in invested assets. He wishes to establish trust for his child. He also wants to make certain that his retirement demands are met.

Following years of managing his fortune on his own, Joe decides to enlist the assistance of a wealth management agency. Normally, this entails a group of specialists with varying expertise. These professionals can devise a strategy to maximize Joe’s wealth and deploy his assets in order to achieve his objectives.

In this situation, an accountant may assist with his commercial interests, an estate attorney can help set up a trust in a tax-efficient manner, and a financial adviser can ensure that the invested assets are adequately diversified and invested in accordance with Joe’s financial strategy. An individual may ensure they reach their financial objectives with an effective strategy with the assistance of a wealth management provider.

Stages of Wealth Management

Wealth management is a multi-step process that includes:

  1. Obtaining financial information

The initial step of the wealth management process serves as the basis for all that follows. Your initial appointment with a wealth manager will last around an hour. This is usually a free, zero-obligation consultation in which you may describe what you require from a financial adviser, your financial objectives, and the sort of preparation you’ve done so far. This initial step determines if the partnership is mutually advantageous for you and the wealth manager. If you both approve, you can go to stage two right away.

  1. Setting financial objectives

It’s here that you define your ideal situation – your goal sheet in an ideal world. Provide your financial manager with as much detail about your existing assets, situations, and tolerance for risk as feasible. Give your financial advisor with all recent remarks, insurance details, and current assets so that your estate may be evaluated as a whole – policy values, terms, perks, and more. Offering this data upfront allows you to personalize your planning strategy to your specific needs.

  1. Portfolio auditing and analysis

When you’ve submitted all of your data, your wealth management team looks through your existing approach to see what’s working and what isn’t. They will also consider the ramifications of any future modifications in order to develop an updated plan. If you’re wondering why your wealth manager is so interested in your tolerance for risk and retirement timetable, it has a big impact on the model for asset allocation.

  1. Advising on a financial plan

When you get to this level, your financial advisor will organize a meeting with you to go through the outcomes of the previous stages. They will detail how efficient your existing investing approach is, consider potential changes, and together you will develop a portfolio plus design the best plan to steer you toward your objectives. It’s critical to be truthful at all levels, but it’s more vital now. Your thoughtful thinking is required to ensure that your financial adviser has all of the information needed to build a strategy that is customized to meet your goals.

  1. Putting the strategy into action

The execution stage entails multiple phases in and of itself, but it is here that the point-by-point details are sorted out. Upon meeting with your financial manager, you will hear their recommendations and add your own. This is the point at which your strategy falls together. Your adviser can then work with you to ensure that your intentions are carried out appropriately and on time.

  1. Plan monitoring and reporting

The final phase is a continuous component of the procedure in which you will engage with your wealth manager on a daily basis. The frequency of these sessions is a matter that you and your adviser can agree on. Frequent reviews keep you informed of your plan’s development, effectiveness, and any other developments. It is also crucial to have access to an exceptional team of wealth managers in between review meetings. If you have any updates or queries, simply notify your team, and your advisor should contact you as well if they have any questions or changes.

Types Of Wealth Management

  1. Financial Planning: This sort of wealth management advises you on financial choices depending on your resources in order to achieve your short-term plus long-term financial objectives. Financial professionals can assist you plan, invest, plus save for retirement, filing taxes, and doing other things.
  2. Asset Allocation: This sort of wealth management is concerned with developing an investing strategy focused on your financial objectives and ability to tolerate risks. The idea is to weigh risks and returns and then alter the proportion of assets appropriately.
  3. Asset Management: As the name implies, this sort of wealth management involves handling your financial affairs. Asset managers help you achieve your financial goals by assisting you in purchasing stocks, bonds, and funds and then tracking them for you. Asset management varies from asset allocation in which asset allocation prioritizes higher-risk, higher-reward investments over asset management.
  4. Estate Planning: This sort of wealth management emphasizes creating a plan to oversee your estate in the event that you become disabled or die.
  5. Tax Accounting: Tax returns and payments are the emphases of this sort of wealth management. Tax accountants will assist you in determining what deductions you may make so that you owe less when tax time arrives, as well as assist you with any taxes that may be problematic owing to investments you’ve made.

Wealth Management Advantages

  • Aids in the provision of a comprehensive financial strategy

The wealth management adviser assists investors in developing a financial strategy via wealth management services. It assists the customer in creating money in a methodical manner by offering correct advice. Wealth managers with extensive experience assist their clients in comprehending the requirements and goals to be met. Wealth management aids in the development of financial strategy. The wealth adviser spends a significant amount of time and effort understanding the client’s needs and assisting in reaching the financial goals that have been requested.

  • Reduces your financial worries

Wealth advisers assist their customers in recognizing financial uncertainty through their knowledge and skills. When the need comes, the wealth of knowledge assists in making key financial decisions. Wealth advisers support its customer in managing their funds through uneven market conditions, which may sometimes cause stress. Wealth management aids in the reduction of financial stress and the prioritization of financial decisions based on a timeline. The wealth management adviser considers all financial elements while developing goals, which eventually aids in the organization of finances from time to time.

  • Personalized services are available

Individuals receive individualized assistance from wealth managers based on their financial situation. In other words, there is no uniform formula for wealth management that can be applied to everybody. Every customer receives personalized wealth management advice from a dedicated wealth management adviser. The wealth manager develops financial solutions while keeping the customers’ particular requirements in mind. The wealth manager serves as a financial advisor and counselor. The customer may call its wealth manager at any moment to discuss any financial concern, and the wealth management advisory assists its client in meeting all of their demands by developing various plans.

  • Offers a versatile investment strategy

The wealth manager is continually thinking about the client’s improvement and financial well-being, which is why they give a flexible investing method whenever the need arises. Wealth management and counseling take into account both market categories and market circumstances. Wealth management consultants devote their time to assisting clients in charting a course through troublesome financial ups and downs, allowing them to make smarter investment decisions. Wealth managers employ this adaptable investing strategy, which allows the adviser to adjust financial plans in accordance with fresh ideas, views, and market situations.

Private Wealth Management Services For Individuals

HNIs in India and worldwide are the most inclined to seek out wealth management services. Most HNIs have intricate investments, particularly offshore holdings, that demand expert advice, like the one given by expert wealth managers. Individuals’ wealth management services often comprise the following features:

  • Derivatives risk management
  • Investment in Venture Capital 
  • Stock Option Investing Planning
  • Real Estate Investing

Also with the rise in wealth of the world’s top 1%, HNIs have begun to expect more individualized service, prompting many companies to establish specific departments devoted to customizing wealth management services for their elite and richest customers.

Financial planning and Wealth Management: Is there any difference between these two?

Yes, financial planning and wealth management are two different things.

Personal financial management requires financial planning and wealth management. Although financial planning and wealth management are both concerned with money, they are not the same thing. Knowing the distinctions between financial planning and wealth management is critical since it will assist you in selecting the best one for you throughout your financial life.

ParticularsWealth management Financial planning
ApplicabilityWealth management is appropriate for HNIs with adequate money. It is designed to double current wealth numerous times while also preserving it.Financial planning is intended for everyone, both HNIs plus non-HNIs.Financial planning seeks to save and invest your money in order to reach your financial goals.
GoalWealth management is concerned with managing current and collected wealth in various assets and investing it in various financial instruments for development.Financial planning is controlling your income and spending and putting them to use to attain your life objectives. It makes use of your existing money to fulfill your financial goals and determines whether it is enough. 
ScopeWealth management exclusively addresses your earned money and how to expand it with high-yielding returns.Financial planning entails controlling your daily costs, monthly salary, savings, tax savings, and tax preparation. Consequently, the scope of financial planning aids in the development of a financial roadmap while also taking into account collected wealth to fit your intended financial objectives.
Client ParticipationWealth management necessitates active interaction with the wealth manager in order to maximize investment decisions for future wealth generation and preservation.Individuals are not required to actively participate in financial planning. The financial planner creates a strategy that the individual must follow. 
Type of ManagementActive ManagementPassive Management
Consultant remunerationA wealth manager charges a proportion of the portfolio of the client. They usually cost 1 percent to 2 percent of the portfolio they manage on an annual basis.A financial planner in India charges a flat fee of Rs.5,000 or more for each individual, with the pay increase with the intricacy of the task assigned to the planner. 

Wealth Manager Vs Financial Advisor: The Difference?

The term “financial adviser” encompasses an extensive spectrum of financial specialists who are neither regulated nor certified. Wealth managers, on the other hand, are a sort of financial advisor that specializes in difficulties impacting highly wealthy customers. Wealth managers’ minimum investment is often far greater compared to financial advisors.

Wealth managers often offer additional amenities than financial advisors. Charitable giving planning, trust services, estate planning, legal planning, and family legacy planning are examples of these services. As a component of their expertise, several financial advisors also offer luxury health care.

Bear in mind that the job title “wealth manager” is simply a generic word that may be used by anybody and indicates no special certification. Always conduct due diligence on any financial advice you choose.

Asset Management Vs Wealth Management: The Difference?

Also read Asset Management vs Wealth Management: What Is The Difference? for more details.

CriteriaWealth ManagementAsset Management
DefinitionWealth Management is the management of the client’s whole financial situation.Asset management is the management of a client’s assets.
FocusWealth Management focuses on asset management and financial planning. These are two areas of specialization in wealth management.Asset management is a subgroup of wealth management. But with a narrower emphasis.
FunctionsInvestment or asset portfolio management, tax preparation, educational planning, inheritance planning, real estate planning, insurance, charity donation, planning for retirementManagement of investments or assets, assessing previous and present data, risk-return analysis, Projection, Asset management plan design, and selection of appropriate assets.
Registered as?Typically, wealth and management managers are registered as investment advisers.Typically, asset managers are registered as broker-dealers.
DutiesThe “Fiduciary” duty of a wealth management firm is putting the interests of the customer ahead of one’s own. Providing items that are “appropriate” for the client is necessary.An asset manager is necessary to provide items that are “appropriate” for the client.
Strategy for Management Wealth management is a process-driven strategy. It requires the coordination of inputs from financial professionals, attorneys, accountants, insurance agents, and other financial management specialties.Because asset managers primarily provide in-house goods via their financial skills and direct engagement in a market, their approach is more complex and inventive.
Terms of compensationContingency fee + fee charged for an asset managed that supports neutrality in suggestions.Typically, a fee that is based on commission for the sales of products might lead to a dispute of interest.

Wealth Management Vs Private Banking: The Difference?

ParticularsWealth ManagementPrivate Banking
Service offeringsWealth Management offers consultancy services in tax prep, asset structuring, plus art, asset allocation, pensions, estate planning, philanthropy, real estate, and family and business migration.Private Banking offers banking services, asset management, brokerage, and basic tax counseling.
ApproachWealth Management focuses more on financial advice. It is concerned with accumulation, reinforcement, preservation, conservation, plus wealth transfer. It begins with developing a financial plan with the client that suits the demands of his family and implementing the plan with professionals from all sectors concerned. It has been watching the progress of the same and the aims of the family with the customer over to make the required modifications.Private Banking advocates for a one-to-one approach based on existing bank packages for HNWIs or UHNWIs.
AutonomyThe Wealth Management Manager, as an independent organization, may provide customized service and show the products of many institutions, allowing the customer to select the ones that best suit their condition. For security concerns, it is common for a Wealth Manager’s Client to employ various institutions.Private Banking exclusively offers its clients items from the bank for which they work. 
Investing StrategyWealth Management gains from the adaptability and ability to act only in the interests of clients, as he is also independent in the selection of the underlying assets that comprise the client’s portfolio. Private Banking has lengthier and heavier processes, lesser independence and openness, i.e. underlying assets chosen for portfolios, resulting in occasional conflicts of interest.
ContactsEverything in Wealth Management begins with recognizing the client’s realities and worries and then devising and implementing a strategy to reach the client’s goals – to ensure a secure and pleasant life for him and his family. Throughout the process, the client is questioned and asked to think about sensitive subjects that are often overlooked. In this approach, a trusted connection between Wealth The manager, client, and family are established for many years of partnership.Private Banking services demand less time, participation, and knowledge of the customer because they are “packages” that are then merely tailored to the client’s higher or lower risk appetite and asset amount.
CostsThe customer can save money with Wealth Management since he has access to a wide variety of services and providers (banks, insurance firms, etc.) without having to meet with many organizations. It also benefits from the collective bargaining power of asset management, which an individual customer does not have.The customer has one price per bank and one contact per bank in Private Banking. As a result, he has less bargaining power.

Wealth Management Vs Portfolio Management: The Difference? 

Wealth Management Vs Portfolio Management: What is the difference between these two terms? 

People frequently mix up portfolio management with wealth management, despite the fact that they are two completely different concepts.

Let us look at wealth management vs portfolio management in the table below

ParticularsWealth ManagementPortfolio Management
DefinitionWealth management means handling the overall financial situation of the clientPortfolio Management means handling a client’s asset portfolio
Area of focusWealth management’s area of focus is financial planning for clients.Portfolio Management’s area of focus is options for investment
ExampleAssume there is a wealthy individual whose fortune must be handled. The individual desires more financial control and active management in order to reduce financial commitments and prepare properly. Wealth managers often monitor financial control and fulfill the individual’s requirement for wealth management.If an investor has Rs 3 lacs capital, to begin with, and wants to build a diverse portfolio to assist leverage better returns and reduced risk measures. A portfolio manager will allocate assets among several asset classes such as stocks, MFs, real estate, FDs, bonds, gold, and others. The portfolio manager will perform the split in order to optimize returns while laying a foundation for a lower-risk strategy.
DutiesWealth Management handles client tax, accounting, retirement, and estate planning, among other things.Portfolio Management handles assets such as bonds, commodities,  stocks, ETFs, mutual funds, and others to maximize profits.
Person Designated Wealth managerPortfolio Manager
ObligationsWealth management performs fiduciary duties in order to enhance the client’s advantage and manage wealth correctly.Portfolio Management handles assets appropriately to get high returns while minimizing risk measures.

Things to Consider for Private Wealth Managers

The below represent a few of the major considerations that wealth managers must evaluate while delivering private wealth management services:

  • Time Frame for Investment:

The temporal horizon of investing varies from person to person and from firm to company. While one investor may be quite content to invest for a decade or more, another may have a significantly shorter time horizon in mind. The reality that an individual, no matter how wealthy or powerful, has a finite life span is at the basis of this variety. This is in sharp contrast to corporations, which have the same rights as persons and have an unlimited lifespan.

Wealth managers have to take into account not just the building of wealth for their customers, but also the transference of funds at the conclusion of the life of the individual.

  • Numerous Tax Factors

HNIs who have abroad interests get taxed on their gains, which differ from one government to the next. The wealth manager must assess each of these interests independently, taking into consideration the various taxes procedures and guidelines in the nation of investment. Hence, wealth management includes a variety of portfolio management approaches that can deliver clients yields that are consistent with the investment purpose once all applicable tax obligations have been met.

How do Wealth Management Managers oversee the assets of their clients?

  • Risk Management

 Risk assessment is generally the first stage in developing a tailored investment strategy for the customer. Risk analysis entails determining the risk appetite of the client’s capacity in relation to his finances. Current or future duties, investment goals, clients’ personalities, and other considerations all play a role in determining this competence. These and other relevant customer information are used to create an in-depth profile in order to get a detailed grasp of the client’s risk-taking capabilities.

  • Portfolio Allocation

 At the end of the risk analysis process, both the wealth manager and the client should have a clearer knowledge of what risk-return relationship is most appropriate. Financial advisers and wealth managers are obliged to develop an adequate allocation strategy to guarantee compatibility with the client’s risk-reward requirements. The suggestions would include distributing the funds available or investable for the client among major asset classes like real estate, stock, debt, alternative investment funds, etc to optimize returns while limiting the risk associated with the entire portfolio.

  • Investment Vehicles 

Wealth managers in India frequently have solid connections with big banks, allowing them access to a diverse choice of investment opportunities. Wealth managers would strive to give customized investment solutions that may be specifically tailored to the needs of the client in addition to discovering existing investment possibilities. The mix of regular and specialist financial products would differ from client to client, allowing for a significant level of personalization.

  • Investing Process

 Generally, wealth management entails accomplishing short-term plus long-term financial goals. This is often accomplished via investment advisory services and support that provide investors with customizable accessibility to short-term possibilities. While doing so time, they would guarantee that the investor’s long-term financial goal is considered while picking investment alternatives.

  • Research and Execution

The wealth manager’s job does not finish when the client makes the selected investments. The wealth manager is additionally responsible for closely monitoring the achievement of the varied investments over time. In most circumstances, the customer will continue to get further reports that include quantitative and qualitative methodologies to confirm that the portfolio is being performed appropriately. This is particularly necessary given the diverse risk levels, characteristics, and factors that contribute to a portfolio’s total complexity.

The Future of India’s Wealth Management Industry?

While India’s economy grows and develops, so does the demand for competent wealth management. The wealth management sector in India has expanded over the past few years, with more services being offered, more firms joining the market, and investment in breakthrough technology.

The wealth management sector in India is rapidly expanding and changing, driven by technology developments, rising investor knowledge, and the accessibility of novel financial products. 

A) A summary of the present condition of the Indian wealth management business

Clients who are introduced to fresh AIF platforms gain from a diverse set of possibilities as well as competitive pricing. It ensures the survival of the industry. Traditional suppliers like financial institutions, insurance firms, and asset management platforms presently dominate the business. Yet, there has been an inflow of fresh firms over the past few years, like digital-first start-ups and independent financial advisers, who are disrupting the industry and bringing novel goods and services to the table.

  • During the previous decade, the sector has expanded dramatically. Given that India’s GDP is predicted to rank third in the world by 2030, the number of indigenous millionaires and billionaires is expected to grow further.
  • Moreover, Boston Consulting Group predicts that India’s financial wealth would reach US$ 5.5 trillion by 2025, expanding at a 10% annual pace.
  • Indian wealth management businesses must alter both their policies and technology to compete with their overseas counterparts.

It is obvious that the wealth management sector in India is quickly developing and expanding prospects for both providers and customers. With technology serving a progressively vital part in the sector, the industry’s environment is projected to alter further in the future years.

B) The Future of the Indian Wealth Management Sector In India

Greater emphasis on technology and digital solutions gets anticipated in the next years, as well as more sophisticated investments in AI and ML. With the rising use of Robo-advisers and other technology to decrease costs and improve procedures, the sector is expected to progress towards automation.

The amount of private wealth management organizations in India is also expected to grow. These companies will most likely be focused on delivering personalized services to high-net-worth people and families, as well as specialty goods and services suited to their specific demands. Demand for more complex and personalized advice is also expected to grow as customers gain greater awareness of the investing environment. This will result in more financial advisers giving customers individualized advice that considers their unique requirements and ambitions.

Further collaborations between the banking industry, fintech and wealth management firms, and may also be expected, as FIs seek to better fulfill their client’s requirements by providing them with access to a choice of investment possibilities. A further partnership among conventional banking and digital-only wealth management businesses might be part of this.

Lastly, the Indian wealth management business is expected to continue to embrace sustainability and socially responsible investment. This means that businesses will prioritize investing in enterprises that make beneficial benefits to society while limiting their environmental effect.

Final Takeaway

If you’re ready to let go of the pressure of finding out how to protect and develop your money through the real estate on your own, turn to Assetmonk. Our consultants provide the greatest real estate guidance and explain everything you need to know about taxes and more. There is more than one method to increase your income, and we at Assetmonk will check your real estate assets and your goals to determine the best path for you based on your financial situation.

Not yet wealthy, but with a promising future? We will also assist you. We feel that establishing a collaboration with us before you become wealthy allows us to build our connection with you for the future. Book an appointment with us if you’re ready to begin your real estate investment management journey.

Wealth Management FAQs

Which are the top wealth management companies in India?

The following are the top wealth management firms in India:
1. Angel Broking
2. Centrum
3. Avendus
4. Bajaj Capital
5. Kotak Wealth Management

Do wealth management companies charge a hefty amount of fee?

Yes. The amount charged by wealth management services is relatively expensive since the investor’s investment portfolio is tailored specifically. In addition to the predetermined fee imposed on the upfront investment amount, these wealth management services retain a portion of the profits made as an extra service charge.

Who should opt for Wealth Management Services?

Wealth Management businesses can provide financial planning to HNI investors that want tailored financial solutions and want to engage in a diverse variety of asset types.

Is availing of Wealth Management Services risky?

Yes. Although your portfolio would be tailored by a group of experts based on your risk tolerance and investment objectives, the danger of negative return remains due to market instability and its impact on various investment vehicles.

What is a wealth management app?

The creation of wealth management software entails building a solution that allows customers to track their income and spending. Budgeting is simply one of a wealth management app’s primary functions. Wealth apps also provide much more, such as advice on where to invest more wisely or how to boost savings.

Is financial planning part of wealth management?

Definitely not. Financial planning and wealth management are two different things. Wealth management is exclusively concerned with currently collected wealth and how to protect and expand it. A financial plan, on the other hand, creates a detailed blueprint focused on your financial goals and aids in wealth growth.

How much money do you need for wealth management?

The amount of money required to engage with private wealth management varies depending on the business and the manager. 

What are the different types of wealth management?

Nowadays, there are three primary categories of wealth management service providers: banks, brokerage firms, and boutique advice organizations. Banks have a broader investment distribution strategy, implying that they focus on a larger investment portfolio. They serve clients in the mid-level market as well as HNWIs.

What are the steps of wealth management?

Wealth management is a multi-step process that includes:
1. Obtaining financial information
2. Setting financial objectives
3. Portfolio auditing and analysis
4. Advising on a financial plan
5. Putting the strategy into action
6. Plan monitoring and reporting

Is wealth management for rich people?

Wealth management, due to its comprehensive nature, is often restricted to persons with at least a substantial net worth.

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