Private Wealth Management:

- The investment management specialty known as private wealth management is

geared for high-net-worth individuals and families. In comparison to financial
planning in the 1980s, private wealth management now includes both intricate
personal financial planning issues and taxable investment management.
Although it isn't absolutely necessary, the word "private" conveys the close-knit,
consultative relationship that effective wealth managers have with their clients.
- Private wealth management demands comprehensive and specialized answers
to a client's complex investment goals, as opposed to institutional money
management or even asset management where the end investor is a taxable
individual investor. Asset management, on the other hand, frequently entails a
narrowly targeted investment mandate that is uniform among investors, as in the
case of mutual funds.
- Thus, private wealth management is an industry focused on managing
investments, but it also takes into account a client's entire financial situation in an
integrated manner, taking into account the client's changing explicit and implicit
assets and liabilities, the complexity of his or her tax situation, and the subtleties
of behavioral biases. Investment professionals switching from managing
portfolios for institutions to managing portfolios for individuals quickly learn the
peculiarities of private wealth management.
Portfolio design and investment policy development are affected by the investor’s views
and circumstances with respect to
- Return and spending requirments,
- Risk tolerance,
- Taxation

The Advantages One of the largest benefits of private wealth management is that you
can create a formidable portfolio. Clients also have the confidence that comes with
having a financial future planned out that includes their personal wishes and goals.
While there are templates available on how to plan for retirement and how to save and
spend your money, nothing can compare with having a financial plan tailored
specifically for your income, lifestyle, financial goals, and financial means. A private
wealth manager can also better educate you on the realities of your current financial
situation. You’ll know under no uncertain terms how well or how poorly you are doing
when it comes to planning for your financial future and investing your money. Even
individuals with a high net worth need a bit of professional assistance when it comes to
their retirement plans.

The Disadvantages To get a clear and balanced picture of what private wealth
management is, it’s a good idea to know just as much about the most common
disadvantages of private wealth management as you do about the most common
advantages. The biggest disadvantage is that having a wealth manager whom you don’t
trust can result in financial disaster and a major headache. It’s best that you take your
time and do some research before deciding on a wealth manager. Some may not be as
forthcoming as you’d like when it comes to telling you how your money is being
invested. There’s also a certain amount of risk involved with private wealth
management. Before you decide on private wealth management in New York or
anywhere else, make sure you check out the company’s reputation, hear from past and
present clients, and make sure the manager is familiar with working with a client with
your net worth. Gaining a preliminary understanding of private wealth management can
help you better determine if a wealth manager is going to do you more harm than good.
Rather than let your money manage you, learn how to manage your money and make it
work for you and your financial goals. If you don’t already have a private wealth
manager, look into hiring one. Your future self and your future finances are sure to
appreciate it.
A View of Private Wealth Management

• investment horizon,
• liquidity needs,
• legal structures and requirements, and
• individual circumstances.

Simple examples of how these elements might apply to people and institutions differently are simple to
come up with. On many of these subjects, a large number of extremely skilled financial analysts have
gained sophisticated insights. As a result, we'll examine the practitioner and scholarly literature on
private wealth management subjects that have to do with the seven aforementioned portfolio
elements.

FACTORS AFFECTING THE ASSET MIX

- Goal Factors
- Risk Tolerance
- Time Horizon

- Liquidity
- Legal form
- Uniqueness

The asset mix is the breakdown of all of the assets within a portfolio, such as
stocks, bonds, cash, and real estate. Within an asset class, assets can be mixed even
further, for example, stocks in a portfolio being either large-cap, mid-cap, or small-cap.

1. Goal factors
Goal factors are individual aspirations to achieve a given level of return or saving for a
particular reason or desire. Therefore, different goals affect how a person invests and
risks.
2. Risk tolerance
Risk tolerance refers to how much an individual is willing and able to lose a given
amount of their original investment in anticipation of getting a higher return in the future.
For example, risk-averse investors withhold their portfolio in favor of more secure
assets. In contrast, more aggressive investors risk most of their investments in
anticipation of higher returns. Learn more about risk and return.
3. Time horizon
The time horizon factor depends on the duration an investor is going to invest. Most of
the time, it depends on the goal of the investment. Similarly, different time horizons
entail different risk tolerance.
For example, a long-term investment strategy may prompt an investor to invest in a
more volatile or higher risk portfolio since the dynamics of the economy are uncertain
and may change in favor of the investor. However, investors with short-term goals may
not invest in riskier portfolios.
4. Liquidity
As an investor, it is imperative to first analyse your existing portfolio before allocating
funds further. For instance, if a huge chunk of your portfolio is dominated by real estate,
then you must diversify your assets in a manner that reduces your allocation to risk
assets such as real estate or equities and increase investments in safe instruments
such as debt and cash. And while you do that be cognisant of the aforementioned
facets which we discussed.
You see, diversification of assets gives you a lee way to counter market uncertainties
and acts as a stabiliser for your portfolio when a particular asset class crashes. Broadly
an effective asset allocation offers the following 4 benefits which are:
1. Lowers investment risk
2. Reduces dependency on single asset class
3. Protects during turbulent times
4. Makes timing the markets irrelevant

5. AGE
Your age is one of the biggest factors that can influence your asset allocation. You
should start investing at a young age, preferably as soon as you start earning. When
you start young, you give time for your investments to enjoy the power of compounding
and create wealth for you.

Rule of 100: Many financial experts recommend the “Rule of 100” for age-based asset

allocation. As per this rule, the equity allocation of your investment portfolio should be:

“100 minus your current age”. For example, if you start investing at the age of 23, you

should start with an equity allocation of 77% (100 – current age 23 years = 77% equity

allocation).

As per this rule, the remaining 23% asset allocation can be towards other asset classes

such as fixed income, gold, etc.

As your age increases, you should go on decreasing your equity allocation by 1% every

year and increase your fixed income allocation by 1%. Please note, the Rule of 100

considers only your age for determining your asset allocation. However, along with age,

you also need to consider other factors and accordingly arrive at the appropriate asset

allocation.

Functions of Private Wealth Management

- Private wealth managers leverage their expertise in various fields to help wealthy
individuals manage their wealth efficiently. Here are some of the services offered
by private wealth management
1.) Generate Income - The first assignment of the private wealth manager is to create
new income and grow the client’s current wealth. Due to inflation and the increasing
number of high-net-worth individuals, the client’s objective is to stay at the top of the
table and increase their purchasing power. With their wealth of experience in
investments, the wealth managers must take advantage of various investment
techniques that will bring in additional income annually. They can help their clients
invest in hedge funds and private equity funds that may not be accessible to less
wealthy individuals. Occasionally, they take the input of other investment experts, such
as the client’s attorney and other advisors, to help them make well-thought-out
decisions.
2.) Asset Protection & Capital Preservation - Private wealth management includes
protecting client assets either from lawsuits, government authorities, or other threats.
Wealthy clients are sometimes sued for numerous reasons, including succession,
marital issues, and property disagreements, and they may be forced to compensate the
other parties if they lose the lawsuits. The wealth managers ought to be ahead of the
game and find ways to handle the lawsuits, either by stopping them from happening or
by making favorable out-of-court settlements. They may also move a portion of the
client’s wealth to offshore banks to protect it from being over-taxed. The managers can
advise their clients on how to set up trusts and foundations, and how to manage
donations.
3.) Tax Management Wealthy - individuals strive to make the necessary tax payments
in order to stay on the right path with Uncle Sam. Due to often having multiple streams
of taxable income, clients want to choose the most efficient tax plan that will save them
money and still comply with the authorities. A small difference in tax can bring huge
differences in after-tax earnings, and a private wealth manager who understands tax
regulations can help the client choose the most favorable tax combination. The private
wealth manager can also advise on inheritance tax, where the client possesses
inherited property or has passed some of their estate to other family members.