Let’s face it – most of us have a fair idea of how to support ourselves financially by generating enough wealth, but when it comes to managing wealth, it’s almost certain that we need someone qualified to help us with the task.
Wealth management is a service offered by high-level professional financial institutions that takes care of financial investment, tax/accounting, retirement planning, estate planning and philanthropic endeavors. Wealth managers combine inputs from financial experts with advice from the client’s attorney, accountants and insurance agent for the sole purpose of laying down a feasible and risk-mitigated financial roadmap for his clients. In other words, the basic tenet of wealth management is offering a client a holistic approach that involves a single wealth manager coordinating all the financial services needed to manage his clients’ money and plan for their family’s current and future needs.
Why should you entrust your monies to a wealth manager?
A wealth manager is a qualified professional employed with a wealth-management firm, with access to in-house financial experts and services. He often starts managing wealth by formulating a plan that not just maintains, but also increases the client’s wealth based on the latter’s financial well-being, life goals and risk appetite. Once the plan is executed, the wealth manager meets regularly with his client(s) for reviewing and formulating life goals, reviewing and rebalancing financial portfolio, investigating whether additional services are needed. But most importantly, a wealth manager follows his clients throughout their life.
Here are a couple of pointers that you should keep in mind before appointing a wealth manager:
He should be focused on building your brand/wealth
He should be heavily invested in technology that improves not only your financial well-being, but also his productivity
He should work on a partnership-based model, coupled with innovative use of technology
He should focus on transparency and compliance while opting for attractive, segment-focused financial products
Wealth management in India: where it stands today
Wealth management in India has gained importance amongst local and global players in the last couple of years. With a GDP growth rate inching towards the 9% mark and a reliable future outlook, India’s growth story is making it an increasingly attractive market for wealth management firms. This is likely to continue as India is touted to be the third largest global economy by 2030. India’s wealthy are relatively young compared with their international contemporaries. Which is why, wealth management in India is altogether a different ballgame. The diversity in demography presents good opportunity for creating products that address the needs of a young population and leveraging new technologies, such as social and mobile-centric investing applications.
Wealth management in India is largely fragmented. Most established players have so far focused mainly on the urban segment, leaving untapped about more than a quarter of India’s high net worth individuals (HNWI) population. No wonder homegrown wealth management firms are recruiting more staff and expanding in smaller cities as well with the objective of attracting rising number of newly minted millionaires. Also, the regulatory environment for wealth management in India is evolving, presenting opportunities for wealth managers to dabble with new financial products. Many global banks are struggling to compete with local firms, which typically have a lower investment threshold and can reach out to clients in smaller cities where global banks can’t maintain cost-effective presence. Also, homegrown wealth management firms are not subject to the stringent global regulations of international private banks, thus allowing them to invest their clients’ monies in real estate – a sector riddled with obscure rules.
Listed below are some of the wealth management mistakes that you should avoid:
Doing it by yourself – you can’t possibly concentrate on your profession/business and manage your wealth at the same time. Wealth management in India is done by professionals qualified for the job, and they can go a long way in understanding you and your needs, lifestyle and family.
Appointing more than one wealth manager – avoid this at all costs. While selecting a suitable manager for the job, do a thorough background check, ask important questions, determine their plan of action. And most importantly, avoid service providers who base their income on commissions from financial product vendors.
Lack of clarity – have clarity on your life goals. Don’t be focused on just increasing your wealth.
Not revisiting objectives – nothing is permanent in the cosmos. The only thing that’s constant is change. Hence, keep revisiting your life goals. And while you do this, apprise your wealth manager or relationship manager of the change so that he can reset the entire portfolio.
Being greedy – you will be tempted to take risks when the market is bullish. Our advice: don’t go down that path. Keep some funds aside for speculation, but don’t put all your monies on stake.
Not involving family – this is a grave mistake that investors should stay away from. Discussing life goals with family can give you clarity, thus, helping your wealth manager formulate a plan that best fits yours and your family’s financial requirements.
Over dependence on wealth managers – after all, they are humans too. So ensure that a healthy sense of accountability is established. Monitor and question performances when the output is not as per your expectations.
In conclusion, wealth management in India is more transparent and organised than before. The trend of appointing well-qualified wealth managers for the purpose of handling finances is slowly picking up as more and more HNWIs are learning from the mistakes of their foreign counterparts. So don’t wait any further, and start formulating a robust plan for the times to come.