Last Updated on Dec 24, 2019 by James W

Wealth management, as a concept, is quite complex and anyone can be forgiven for getting confused about what it entails.

In wealth management, there are plenty of professionals and companies who work to provide advice among other services to their clients.

The highly individualistic and personal way in which these services are offered means that every client needs to experience wealth management in a bespoke way.

Wealth Management is about finding the right approach to take care of your financial needs, as well as the needs of your family and business through a long-term consultative approach.

Depending on what your demands are, it can consist of different levels of intricacies and services. At the heart of wealth management are personal services and long-term relationships with advisers or their associates. The financial adviser must be in a position to offer regular and comprehensive reporting on the management of your wealth including your business or personal finances.

Additionally, a full wealth management service should incorporate guidance on the management of investment, estate planning, tax, retirement plan, cash flow analysis, and wealth protection.

Your assets included, wealth management should also take into consideration your liabilities such as mortgages, expenditures, tax (including any potential inheritance tax), long-term medical care, education fee, among others. In most cases, however, wealth management has more to do with wealth protection and wealth generation.

Clearly, a comprehensive wealth management plan covers different areas of expertise from banking, through to tax, pensions, and investment management. It’s unlikely that one adviser can work on all these areas, so you may need the input of more than one professional to make wealth management work for you.

What are the different wealth advisers?

As mentioned, private wealth advisers usually come in different forms. It can be difficult to generalize about a single category of adviser. For instance, some banks or financial advisers may offer comprehensive and personal services as opposed to others. When it comes to selecting a wealth management firm, you need to look for a connection between you and the professional. Can the adviser help you to meet your financial goals? Do you trust them enough? How do they relate with other professionals in the field?

Some private wealth management companies attempt to be a generalist in what they do. These professionals can advise you on all aspects concerning your wealth as well as your financial planning requirements. On the other hand, there are others who are specialists in certain parts of wealth management such as lawyers, trust companies, and private asset managers.

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You can visit the Commerce Trust Company to learn more about wealth management.

Effective Steps to Wealth Management

When it comes to managing your finances and wealth, you need to work with the right advisers so you can know you are on the right track. In addition to that, you need to know what is involved so your wealth management plan can be executed effectively. Here are the steps you need to follow when it comes to wealth management.

  1.       Collect Adequate Data

One of the most essential steps to effective wealth management is to collect enough information about your financial and personal affairs. Personal information may include details such as you age and the age of your partner or spouse, the number of children you have, the time you intend to retire, and data to help in estimating your life expectancy. On the other hand, financial information include data about your existing investment portfolio, income, savings, liabilities and assets, and expenditures as well as your long-term commitments. Your investments should be categorized into asset classes so it can be possible to create projections for future returns. This analysis should also include aspects such as insurance. It is important to note whether you have cover for critical illness or loss of income.

  1.       Risk Tolerance

The dynamic nature of risk tolerance is also important when it comes to wealth management. At some point in your life, your risk of tolerance could change. Along with planning for retirement, there could be intermediate financial goals such as starting a business or saving for college. The portfolio needs to be adjusted to so these goals can be met. At this point, an advisor may come in handy to make things work out for you. These professionals can use proprietary tools or software to produce details reports pertaining to your plan.

  1.       Create a Lifetime Cash Flow Forecast

With the assistance of your financial manager, you should be in a position to come up with a cash flow forecast. The cash flow forecast should be based on your current position which includes both your assets and liabilities, as well as your anticipated income and expenditure for the future. It should also be noted that the forecast is subject to different assumptions such as the rate of inflation and future investment returns. These are all important as they will help in evaluating how much income you’ll require in retirement, by estimating future assets and expenditure requirements.  Additionally, it will assist you and your financial manager to come up with an appropriate asset allocation for your portfolio.

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For instance, you might only need investment returns of 4 percent every year to attain your stated goals. In actual sense, however, you might be having a portfolio which takes up so much risk than required since it has been designed to achieve returns of 7 to 8 percent every year.

In the absence of cash flow analysis, it would be challenging to assess the amount of income protection and life cover needed to adequately cover you and your loved ones. Bespoke financial planning informs you of what you require. A comprehensive picture of your current, as well as future finances, will go a long way in helping you make appropriate planning as far as tax is concerned. In addition to that, cash flow planning will produce various scenarios to measure how your finances could be affected. For instance, in case you are unwell for some time and not receiving any income, cash flow analysis will help in determining whether you have enough savings and if your illness will affect your lifetime objectives. These kinds of scenarios will help you to determine if you are to save or invest more, or if you’ll need to minimize your expectations.

  1.       Assess the Impact of Your Financial Decisions

Since your financial decisions are all inter-related, it is imperative to consider the impact of one decision on the other. Making an investment in one area may affect your tax liabilities while an unplanned expenditure in a property could greatly affect your liquidity savings for the targeted retirement income. For instance, investing $100,000 in a collective fund portfolio without structuring to limit tax liabilities and them selling the funds the moment you realize some gains will mean that you’ll be subject to capital gains tax on such investments. Therefore, the returns from the investment you make will be minimized by a tax in the absence of careful planning to ensure tax efficient investments.

  1.       Monitoring Your Financial Plan
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Monitoring your financial plan is a crucial stage in wealth management. After you have assessed the effects of your financial decisions, you can now implement your financial plan. After finalizing your financial plan it’s not the end but the beginning of the process. Your plan should be reviewed on a regular basis to ensure it can still meet your expectations even when the risks are higher. Moreover, your own personal and financial situation will change with time, hence the need to review the plan. Potentially, changes in your financial circumstances will your objectives and the means to attaining them thus the need for a review. For example, you may sell your company, receive an inheritance, or you could get a promotion that would see your income rise. All these are possible scenarios that could affect your financial plan. With these kinds of development, you may need to expand or upgrade your objectives. They may also affect your decision to retire, reducing the amount you’ll need to save for retirement or minimize the risk of your investment.

Your objective might revolve around retaining your current assets as opposed to creating future wealth. An essential part of the planning may include structures which will ensure your wealth is passed down to your beneficiaries such as children and grandchildren in accordance with your specifications.

The Bottom Line

Wealth management is important not only for individuals but also for businesses. A lot of individuals have seen successes in managing their assets and finances. However, before you can put yourself at risk, you need to first learn about the art of investing. If someone wanted to offer you services based on what they read online, would you allow them to do so? Such kinds of decisions can be difficult to make. If you are in need of a wealth and financial manager, it is important to hire professionals with the right levels of experience in wealth management. There are numerous wealth management companies out there, so make sure you do your homework and hire the right one.


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