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    7. What Is Wealth Management And Do You Need It?

    What Is Wealth Management And Do You Need It?

    Updated on: 23 May, 2024 06:36 PM

    Wealth management is a term in financial planning services that gets thrown out a lot in our daily lives, and still, many people don’t understand it well. There is a general belief that only wealthy and super-rich class people need wealth management but as a matter of fact, it is as important to every class of society as it is for the wealthy and businesses.

    In a broader aspect, wealth management is a unique form of financial planning service shaped to accredited investors, who are individuals or businesses that meet certain income or net worth bars set by the Securities and Exchange Commission. These individuals generally have a higher risk tolerance and can participate in a wider range of investment opportunities. Wealth management is also for individuals boasting significant assets. These wealth managers furnish in-depth counsel and guidance to such clients. Yet, wealth management facilitates the preservation of wealth and the achievement of future financial objectives. Regardless of one's wealth volume or aspirations, wealth advisors furnish an overall wealth strategy and direction to aid in achieving prosperity.

    Contents

    What is wealth management?

    Wealth management is essentially the big-picture approach to handling your finances, especially for those with a significant amount of wealth. It goes beyond just investing your money and involves a comprehensive strategy and set of services that a wealth manager may offer to address the unique requirements of its wealthy clientele.

    Services that a wealth manager may offer are as follows:

    • Business advice
    • Legal advice
    • Accounting and tax services
    • Investment management and advisory services
    • Charitable plans

    Why do you need wealth management?

    Wealth management isn’t just for the super-rich but does offer particular advantages as your financial situation gets more complex. Here are some reasons why you need wealth management:

    • Complex financial needs: If you have a significant amount of wealth, you'll likely have more intricate financial needs. A wealth manager can help you simplify these complexities and develop a plan that considers all aspects of your financial life.
    • Growing and preserving wealth: Wealth managers can help you develop strategies to grow your wealth through smart investments while also considering how to protect your assets from erosion due to taxes, inflation, or market downturns.
    • Financial goals: Whether it's planning for retirement, funding your children's education, or leaving a legacy, a wealth manager can help you create a roadmap to achieve your specific goals.
    • Tax efficiency: Wealth managers can help you develop tax-minimizing strategies to keep more of your hard-earned money.
    • Time constraints: Managing your finances can be time-consuming. A wealth manager can take care of the heavy tasks so you can focus on other priorities.

    What are the strategies of wealth management?

    Wealth management strategies include various approaches to grow and protect your finances. Here are some key strategies wealth managers use:

    • Risk evaluation: This involves understanding your risk tolerance - how comfortable you are with possible investment losses. This forms the basis for building your portfolio.
    • Asset allocation: This strategy involves dividing your investments across different asset categories like stocks, real estate, bonds, and cash. The goal is to attain a balance that matches your risk tolerance and goals.
    • Diversification: This is a crucial principle of wealth management. It involves allocating your investments across various asset types within each class, reducing risk from any single asset's performance.
    • Rebalancing: Over time, the value of different assets in your portfolio will fluctuate. Rebalancing involves periodically adjusting your portfolio allocations to maintain your target asset mix.
    • Tax-loss harvesting: This strategy involves selling investments at a loss to set off capital gains taxes on promising investments. This helps minimize your tax burden.
    • Retirement planning: Wealth managers can help you develop a plan to ensure you have sufficient savings to live comfortably after retirement.
    • Estate planning: This involves strategies to manage the transfer of your wealth after you pass away. This can include creating a will and trust to minimize estate taxes.

    Frequently Asked Questions

    Q- What does wealth management focus on?

    While asset managers focus on growing investments for maximum returns, wealth managers take a bigger-picture approach. They provide an exhaustive suite of financial services and guidance specifically designed for high-net-worth individuals (HNWIs). This goes beyond just investments, aiming to help clients manage their overall wealth and achieve their long-term financial objectives.

    Q- Why does wealth management matter?

    Your wealth has the possibility to create a lasting impact, not just for you but for future generations. By incorporating estate planning into your wealth management strategy, you can ensure your assets are passed down smoothly and according to your wishes. This thoughtful approach allows your legacy to flourish and benefit those who matter most, far beyond your lifetime.

    Q- Is wealth management a skill?

    A successful wealth manager is a well-rounded professional who thrives in two key areas: technical expertise and interpersonal skills. On the technical side, they possess a deep understanding of capital markets, portfolio construction, and financial planning. Additionally, strong quantitative and technology skills are crucial for analysis and execution. In some cases, fluency in foreign languages can be a valuable asset.

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    CA Abhishek Soni
    CA Abhishek Soni

    Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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