Wealth

Management

GROUP 6

Group Leader:

Opiña,Clowie

Members:

Priolo,Trisha
Rempillo, Khatelynn
Reyes, Roselle
Nillasca, Maui

3BAF6B
WEALTH MANAGEMENT
Definition / History / Current Trends

Definition
Wealth management is typically viewed as a high-end professional service that costs a flat rate
for financial and investment advice, accounting and tax services, retirement planning, and legal
or estate preparation.

History
It is said that well-known companies like Goldman Sachs or Morgan Stanley used it to
distinguish between their regular financial customers and their wealthy private customers. Over
time, banks and other financial services liked to offer services and expertise in wealth
management. But the global financial crisis of 2009 changed how the business world worked. A
lot of people call the Global Financial Crisis of 2008-2009 "The Great Recession."
Due to reckless lending, a record number of loans went into default. When these losses were
added up, they caused many financial institutions to fail and need help from the government.
Most of the banks that made it through the crisis did better because the market did better, but
their business priorities changed a lot. Most of them changed their business models to reflect
what they had learned from their mistakes.

Trends
1. High Inflation Threatens Economic Growth Outlook
2. Personalized Wealth Management Services; Leveraging Technology
3. Older Advisors Planning to Retire
4. Hedge Against Inflation - Investment Strategies

Financial Advisory
Financial Advisor

A financial advisor provides financial advice or guidance to customers for compensation.

Financial advisors (sometimes spelled as advisers) can provide many different services, such
as investment management, tax planning, and estate planning.

What Does a Financial Advisor Do?

Financial advisors don’t come in a one-size-fits-all package. They often come from diverse
backgrounds, can hold various degrees and certifications, and offer a wide range of services.
Here are some types of financial advisors you might come across as you plan your financial
future:
● Investment professionals
● Tax professionals
● Wealth managers
● Financial planners
 Types of Financial Advisor

Investment advisors
An investment advisor is a person or company who is paid for providing investment
advice to clients. Investment advisors can also manage client assets directly.
Broker-dealers and brokers
A broker-dealer is an individual or company that buys and sells securities such as stocks, bonds
and mutual funds.
Certified financial planner
Financial planners can offer services that don’t require regulation, such as guidance on how to
pay down debt, plan for retirement or create a budget, but some are also investment advisors.
Financial consultant
Financial consultants work with their clients to better understand their assets and what they
want those assets to do for them in the future.
Financial coach
Financial coaches are often the most beginner-friendly financial professionals. Financial
coaches focus on the basics of financial literacy, such as how to save money or reduce
spending. Financial coaches can help their clients build wealth that an investment advisor may
help them manage in the future.
Portfolio, investment and asset managers
They manage client investment portfolios. A portfolio manager or investment manager may deal
strictly with a client’s investment portfolio, but they might offer other financial planning services
too.
Wealth advisors
Wealth managers and advisors can often help their clients with every area of their financial life,
including services like estate planning, tax help, charitable giving and even health insurance.
Financial therapist
A financial therapist combines behavioral therapy and financial coaching to help improve your
money mindset. Financial therapists recognize that budgeting, saving and investing can trigger
difficult emotions, and they can help you with trauma and other negative feelings surrounding
money.

Financial Advisor Responsibilities:

● Talking to clients to determine their expenses, income, insurance coverage, financial

objectives, tax status, risk tolerance, or other information needed to develop a financial
plan.
● Answering client questions about financial plans and strategies and giving financial advice.
● Advising strategies for clients in insurance coverage, investment planning, cash
management, and other areas to help them reach financial objectives.
● Reviewing client accounts and plans on a regular basis to understand if life or economic
changes, situational concerns, or financial performance necessitate changes in their plan.
● Analyzing financial data received from clients to develop strategies for meeting clients'
financial goals.
● Preparing or interpreting financial document summaries, investment performance reports,
and income projections for clients.
● Implementing financial plans or referring clients to professionals who can help them.
● Managing and updating client portfolios.
● Contacting clients regularly to discover changes in their financial status.
● Building and maintaining your client base.

Financial Advisor Requirements:

● Bachelor's degree in business, finance, or related field.

● 1-2 years of sales experience.
● Must have current FINRA Series 7 and 63 Securities Registration (66 or 65 preferred).
● Life and health license.
● Valid driver’s license.
● Knowledge of mutual funds, securities, and insurance industries.
● Proficient in Word, Excel, Outlook, and PowerPoint.
● Comfortable using a computer for various tasks.
● Experience providing quality financial advice.

Examples of financial adviser skills

Research
When a client seeks financial assistance, the adviser conducts extensive research about the
client's economic history. They examine how the client's previous money management
contributed to their current situation. Advisers also investigate ways to achieve the client's
financial goals, including making strategic investments in stocks or properties or investing in
products like life insurance policies or retirement accounts. Research also helps advisers
remain informed on new products that emerge on the market.

Wealth management
Financial advisers understand how to achieve and maintain wealth, a skill they use to advise
clients on earning and managing their money. Wealth management is an aspect of industry
knowledge, where advisers know what investments can generate higher income and their
availability on the market. They also know how to identify wise investments based on clients'
funds and the wealth they want to accumulate.

Analytical thinking
Analytical thinking gives financial advisers the tools to adjust to changing circumstances and
devise solutions to problems. For example, a client expresses their financial goal, but they have
limited monetary resources to achieve it. Advisers analyze the state of the client's finances and
make suggestions that can produce a positive outcome without wasting funds. As new products
emerge on the market, advisers practice analytical thinking to decide the products most benefit
the client.
Interpersonal communication
Verbal communication: Advisers explain their research findings and financial guidance in ways
their clients can understand. They may use less technical language and deliver their advice in
simple terms.

Nonverbal communication
The adviser's body language can show their focus on the session, such as nodding their head
and delivering direct eye contact with the client. It may also include maintaining a neutral facial
expression as the client explains their needs.

Active listening
Active listening techniques show the client the adviser is paying close attention to their
meetings. They may paraphrase the client's explanation or use phrases such as "I understand"
and "I see."

Detail orientation
Attention to detail lets financial advisers stay organized when completing their occupational
duties. They pay attention to the client's requests to gain insight into the investments the client
is likely to make. When developing investment strategies, advisers detail their explanations to
ensure clients understand what actions to take. Also, advisers remain detail-oriented when
recording figures on financial reports.

Empathy
Financial advisers possess empathy to foster meaningful connections with their clients. Clients
may be sensitive about the state of their financial resources, and advisers have access to a lot
of personal information. With high emotional intelligence, advisers can provide
recommendations that cater to clients' needs and lend support.

Risk assessment
Financial advisers need to assess and manage risks before they deliver advice to their clients.
Risk assessment typically occurs during the research process, where advisers anticipate
challenges clients may face as they strive to achieve wealth. Examples of risks might be a
fluctuating market, which can influence the success of investments, or lack of job security,
which can increase financial stress and possibly limit income for the client in the future.

Benefits of Becoming a Financial Advisor

Unlimited income potential

One of the greatest perks of being a financial advisor is the unlimited income potential you can
enjoy. When you work as a financial advisor, you won’t have to worry too much about how to
pay your bills and sustain your lifestyle as long as you have the appetite to get more clients and
carry on more work.
Unique Client Base
One of the reasons to become a financial advisor is the freedom to work with your preferred
group of people. As a financial advisor, you have the power to unleash your creativity in
building a client base.

Rewarding Career
When you work as a financial advisor, you can relish the rewarding feeling of offering invaluable
financial advice to your clients. Seeing your clients making suitable decisions and succeeding
financially because of the education and advice you’ve provided will bring you an incomparable
sense of fulfillment and satisfaction.

Network Growth Opportunities

Being a financial advisor requires you to work with various people every time. Therefore, one of
the perks of being a financial advisor you can enjoy is growing your personal and professional
network.

FInancial Literacy
Your training in becoming a financial advisor allows you to learn about the different financial
strategies you can apply to your personal life. Through the knowledge you’ve obtained from
being a financial advisor, you can provide your clients with the financial guidance they need
while also securing your own future.

Let’s check out some of the things a financial advisor can help you with.

Retirement Planning
A financial advisor can help you build wealth and protect it for the long term. They can estimate
your future financial needs and plan ways to stretch your retirement savings.

Investments
Financial advisor can help you figure out what mutual funds are right for you and show you how
to manage and make the most of your investments. They can also help you understand the
risks and what you’ll need to do to achieve your goals.

Tax Planning
Whether it’s advising on charitable donations, creating a tax-efficient estate plan, or making the
most of tax breaks and deductions available to you, their ultimate goal is to help you save
money on taxes.

Estate Planning
Working with a financial advisor or an attorney with estate-planning experience is a must. They
can give you the guidance you need to create a plan so you can make sure your wishes are
carried out.
Health and Long-Term Care Planning
A financial advisor or insurance agent can explain your options for long-term care insurance.
Then you can choose a plan that’s affordable both now and in the future when you’ll need it the
most.

Inheritance
A financial advisor thinks wealth managers and financial coaches can help keep that blessing
from becoming a burden. They can advise you on how to adjust your financial goals and
strategies and tackle hard topics like projected taxes. They can also walk you through the
practical steps to take when that time comes.
How to Choose a Financial Advisor
Choosing a financial advisor is a big deal, This is someone you could end up partnering with for
years, maybe even decades, to help you build your wealth. You’ll rely on this person for wise
advice on how to invest your hard-earned money so you can retire on your terms someday.

Interview a few different advisors.

A good rule of thumb is to try to interview at least two or three financial advisors before you
decide who you want to work with. And don’t forget to come to the interview prepared with a list
of questions to ask so you can figure out if they’re a good fit.

Find an advisor who wants to teach you, not sell to you.

A good financial advisor wants you to understand the facts, your situation, the stock market and
how your investment options work so you can make a wise buying decision.

Look for an advisor who’s qualified and knowledgeable.

Just because an advisor is smarter than the average bear doesn’t give them the right to tell you
what to do. Sometimes, advisors are full of themselves because they have more degrees than a
thermometer. If an advisor starts talking down to you, it’s time to show them the door. A
financial advisor works for you, not the other way around. Remember that!

Find out if their advice will be consistent with your beliefs.

It’s important that you and your financial advisor (whoever it ends up being) are on the same
page. You want an advisor who has a long-term investing strategy,someone who’ll encourage
you to keep investing consistently whether the market is up or down.You also don’t want to
work with someone who pushes you to invest in something that’s too risky or you’re not
comfortable with.

How Much Does a Financial Advisor Cost?

Before you hire a financial advisor, make sure you have a good understanding of what you’re
actually paying for. The cost of a financial advisor can vary depending on how they charge their
fees. Some common fee structures are commission-only, fee-only and fee-based.

Commission-Only
Some advisors charge a commission for their services. This means they get a portion of money
when someone uses their services to invest their money.

Fee-Only

Fee-only advisors usually set up their fees in several different ways. Sometimes they’ll charge
you at an hourly rate (usually somewhere between $200 to $400 an hour) based on how much
time they spend working with you.
Commissions and Fees (Fee-Based)

Fee-based advisors take commissions and fees and combine them as part of their payment
structure. They might charge an hourly rate to sit down with you to create an investing plan
tailored for you and a commission based on the funds they recommend.

When to Choose a Financial Advisor

You can start developing a relationship with a financial advisor at any point during your financial
journey. But the best time to choose a financial advisor depends on what you need help with.

What is an Investor Profile

An investor profile specifies an investor's goals, investment horizon, and risk tolerance level. As
a result, it is critical for the effective administration of an investment portfolio.

What is risk tolerance

Risk tolerance is evaluated during the financial planning stage and shows how willing you are
to accept the effects of risks if they materialize.

How does risk tolerance impact your investing?

The risks you are prepared to take in investing have a significant impact on the returns you
obtain. In other words, people with a low tolerance for risk will have to settle for lower returns on
safer assets. individuals who have a high risk tolerance, on the other hand, are able to
undertake investments with uncertain outcomes but large potential returns.

How to define your investor profile?

● How old are you? Younger investors can afford to take greater risks, but older
investors are frequently more conservative with their assets as they near
retirement.
● What is your personal and financial situation?An investor who has children will be
more cautious than an investor who does not. Similarly, someone with a big net
worth may be able to take greater risks than someone who cannot afford to lose
money on an investment.
● What are your investment goals? Investment alternatives vary based on whether
you want to earn more income, grow long-term wealth, fund a future project, or plan
for retirement.
What is your investment horizon? Consider if you need your funds in the near
or medium term, for example, to fund a project, or whether you wish to invest for
the long term. A short investment horizon necessitates minimizing risks as much
as possible, but a lengthy one allows for time to recoup if a higher risk, higher
return venture does not pay off.
● What is your risk tolerance? Assess your capacity to bear the danger of losing your
investment funds. Assess not just your financial capacity to suffer a loss, but also
your emotional capacity. Danger tolerance varies from person to person.

What are the different investor profiles?

Conservative investors- Conservative investors are frequently nearing retirement or have

dependent children. They choose short-term investments and may want to supplement their
income. They desire low-risk exposure and a consistent, consistent return. As a result, the
cautious investor will concentrate mostly on fixed-income investment instruments such as
bonds or debt securities.

Balanced investors- Balanced investors are often between the ages of 40 and 60. They strive
for a one to five-year medium-term investment horizon. They want to save for retirement while
also constructing a portfolio that balances risk and reward. For example, they may allocate half
of their portfolio to guaranteed investments and the other half to more riskier assets.

Aggressive Investor - This investor is often under the age of 40 and does not have any
dependent children. The aggressive investor seeks long-term investments and can afford to
take on more risk of losses that can be recovered for overtime in order to achieve a higher
return on investment. As a result, a major portion of his portfolio will be made up of diverse,
non-guaranteed assets.

Personal Financial Statement

The term personal financial statement refers to a document or spreadsheet that outlines an
individual's financial position at a given point in time. The statement typically includes general
information about the individual, such as name and address, along with a breakdown of total
assets and liabilities. The statement can help individuals track their financial goals and wealth,
and can be used when they apply for credit.

Evaluating Your Personal Financial Statement

Many individuals look at their bank and credit card statements and are surprised that they spent
more than they thought they did. To avoid this problem, one simple method of accounting for
income and expenditures is to have personal financial statements. Just like the ones used by
corporations, financial statements provide you with an indication of your financial condition and
can help with budget planning.
There are two types of personal financial statements: ●
The personal cash flow statement
● The personal balance sheet

Personal Cash Flow Statement

A personal cash flow statement measures your cash inflows and outflows in order to show you
your net cash flow for a specific period of time. Cash inflows generally include the following:
● Salaries
● Interest from savings accounts
● Dividends from investments
● Capital gains from the sale of financial securities like stocks and bonds

Cash inflow can also include money received from the sale of assets like houses or cars.
Essentially, your cash inflow consists of anything that brings in money.

Cash outflow represents all expenses, regardless of size. Cash outflows include the
following types of costs:
● Rent or mortgage payments
● Utility bills
● Groceries
● Gas
● Entertainment (books, movie tickets, restaurant meals, etc.)

The purpose of determining your cash inflows and outflows is to find your net cash flow.
Your net cash flow is simply the result of subtracting your outflow from your inflow. A positive
net cash flow means that you earned more than you spent and that you have some money left
over from that period. On the other hand, a negative net cash flow shows that you spent more
money than you brought in.

Personal Balance Sheet

A balance sheet is the second type of personal financial statement. A personal balance sheet
provides an overall snapshot of your wealth at a specific period in time. It is a summary of your
assets (what you own), your liabilities (what you owe), and your net worth (assets minus
liabilities).

Assets
Assets can be classified into three distinct categories:
● Liquid Assets: Liquid assets are those things you own that can easily be sold or turned into
cash without losing value. These include checking accounts, money market
accounts, savings accounts, and cash. Some people include certificates of deposit
(CDs) in this category, but the problem with CDs is that most of them charge an early
withdrawal fee, causing your investment to lose a little value.
● Large Assets: Large assets include things like houses, cars, boats, artwork, and furniture.
When creating a personal balance sheet, make sure to use the market value of these items.
If it's difficult to find a market value, use recent sales prices of similar items.
● Investments: Investments include bonds, stocks, CDs, mutual funds, and real estate. You
should record investments at their current market values as well.
● Liabilities: Liabilities are merely what you owe. Liabilities include current bills, payments
still owed on some assets like cars and houses, credit card balances, and other loans.

Net Worth
Your net worth is the difference between what you own and what you owe. This figure is your
measure of wealth because it represents what you own after everything you owe has been paid
off. If you have a negative net worth, this means that you owe more than you own.

The Bottom Line

If you currently have a negative cash flow or you want to increase positive net cash flow, the
only way to do it is to assess your spending habits and adjust them as necessary. By using
personal financial statements to become more aware of your spending habits and net worth,
you'll be well on your way to greater financial security.

ECONOMIC FUNDAMENTALS

In business and economics, fundamentals represent the primary characteristics and financial
data necessary to determine the stability and health of an asset. This data can include
macroeconomic, or large-scale factors, and microeconomic, or small-scale factors to set a
value on securities or businesses.

While fundamentals are most often considered factors that relate to particular businesses or
securities, national economies, and their currencies also have a set of fundamentals that can be
analyzed. For example, interest rates, gross domestic product (GDP) growth, trade balance
surplus/deficits, and inflation levels are some factors that are considered to be fundamentals of
a nation's value.

MACROECONOMIC
Macroeconomic fundamentals are topics that affect an economy at-large, including statistics
regarding unemployment, supply and demand, growth, and inflation, as well as considerations
for monetary or fiscal policy and international trade. These categories can be applied to the
analysis of a large-scale economy as a whole or can be related to individual business activity to
make changes based on macroeconomic influences. Large scale, macroeconomic
fundamentals are also part of the top-down analysis of individual companies.
Gross Domestic Product
Gross domestic product is the monetary value of all finished goods and services made within a
country during a specific period.
GDP provides an economic snapshot of a country, used to estimate the size of an economy
and its growth rate.
GDP can be calculated in three ways, using expenditures, production, or incomes and it can be
adjusted for inflation and population to provide deeper insights.
Real GDP takes into account the effects of inflation while nominal GDP does not. Though it has
limitations, GDP is a key tool to guide policymakers, investors, and businesses in strategic
decision-making.

National Income Accounting

National income accounting is a government bookkeeping system that measures a country's
economic activity—offering insight into how an economy is performing.
Such a system will include total revenues by domestic corporations, wages paid, and sales and
income tax data for companies.
National income accounting systems allow countries to assess the current standard of living or
the distribution of income within a population, as well as assess the effects of various economic
policies.

However, the accuracy of analysis relating to national income accounting is only as accurate as
the data collected.

Inflation Rate
Inflation is a rise in prices, which can be translated as the decline of purchasing power over
time. The rate at which purchasing power drops can be reflected in the average price increase
of a basket of selected goods and services over some period of time. The rise in prices, which
is often expressed as a percentage, means that a unit of currency effectively buys less than it
did in prior periods. Inflation can be contrasted with deflation, which occurs when prices decline
and purchasing power increases.

Consumer Price Index

The Consumer Price Index measures the overall change in consumer prices based on a
representative basket of goods and services over time.

The CPI is the most widely used measure of inflation, closely followed by policymakers,
financial markets, businesses, and consumers.
Producer Price Index
The Producer Price Index (PPI) measures the average change over time in the prices domestic
producers receive for their output. It is a measure of inflation at the wholesale level that is
compiled from thousands of indexes measuring producer prices by industry and product
category.
The PPI is a measure of wholesale inflation, while the Consumer Price Index measures the
prices paid by consumers.

Unemployment rate
The unemployment rate is the percentage of the labor force without a job. It is a lagging
indicator, meaning that it generally rises or falls in the wake of changing economic conditions,
rather than anticipating them. When the economy is in poor shape and jobs are scarce, the
unemployment rate can be expected to rise. When the economy grows at a healthy rate and
jobs are relatively plentiful, it can be expected to fall.
Balance of Trade
Balance of trade (BOT) is the difference between the value of a country's imports and exports
for a given period and is the largest component of a country's balance of payments (BOP).

A country that imports more goods and services than it exports in terms of value has a trade
deficit while a country that exports more goods and services than it imports has a trade
surplus.

Viewed alone, a favorable balance of trade is not sufficient to gauge the health of an economy.
It is important to consider the balance of trade with respect to other economic indicators,
business cycles, and other indicators.

MICROECONOMICS
Microeconomic fundamentals focus on the activities within smaller segments of the economy,
such as a particular market or sector. This small-scale focus can include issues of supply and
demand within the specified segment, labor, and both consumer and firm theories. Consumer
theory investigates how people spend within their particular budget restraints. The theory of the
firm states that a business exists and makes decisions to earn profits.

Fundamentals in Business
By looking at the economics of a business, including the overall management and the financial
statements, investors are looking at a company's fundamentals. Not only do these data points
show the health of the business, but they also indicate the probability of further growth. A
company with little debt and sufficient cash is considered to have strong fundamentals.

Strong fundamentals suggest that a business has a viable framework or financial structure.
Conversely, those with weak fundamentals may have issues in the areas of debt obligation
management, cost control, or overall organizational management. A business with strong
fundamentals may be more likely to survive adverse events, like economic recessions or
depressions, than one with weaker fundamentals. Also, strength may indicate less risk should
an investor consider purchasing securities associated with the businesses mentioned.

All business managers need a basic understanding of economics and must think critically about
the impact of micro- and macro-economic events that can take a toll on any company.

Opportunity cost and comparative advantage: concepts used to prove mutual advantage of
individuals, businesses or countries specializing in things with which they have a comparative
advantage and trading for the rest.

Supply and demand models and how economists use them to analyze how buyers and sellers
interact in the marketplace. Elasticity concepts are discussed as well as applications of the
model of demand and supply, including price controls and tax analysis.

Short run and long run economic costs of production concepts and the profit maximizing rule is
applied to both a competitive business environment and a monopolistic business environment.

Microeconomic foundations of consumers and businesses along with elements of

macroeconomic behavior. Macroeconomics offers a set of tools and concepts that both
economists and policymakers use to try to figure out the overall pulse of the economy: real
gross domestic product, the national income identity, the consumer price index, the producer
price index, the inflation rate, and the unemployment rate.

Functions of money, the types of money, the classifications of the money supply, the central
bank, the money creation process, and the monetary policy tools used by a central bank.

Model of aggregate demand and aggregate supply used to analyze the economy-wide (or
macro) effect of economic events. Inflationary gaps and deflationary gaps are discussed with
fiscal policy and monetary policy tools to diminish the effect of an inflationary or a deflationary
gap.

KEY TAKEAWAYS
● Fundamentals provide a method to set the financial value of a company, security, or
currency.
●
● Included in fundamental analysis is basic qualitative and quantitative information that
contributes to the asset's financial or economic well-being.
●
● Macroeconomic fundamentals include topics that affect an economy at large.
●
● Microeconomic fundamentals focus on the activities within smaller segments of the
economy.
● For businesses, information such as profitability, revenue, assets, liabilities, and growth
potential are considered fundamentals.

References:

Wealth Management: What It Is and What Wealth Managers Charge (investopedia.com)

https://www.investopedia.com/articles/personal-finance/050815/what-do-financial-advisers-
do.a sp

https://www.investopedia.com/articles/pf/08/evaluate-personal-financial-

statement.asp How do I determine my investor profile? - UNI Blog

https://www.investopedia.com/terms/p/personal-financial-statement.asp
Investor profiles: Determine what type of investor you are based on your risk tolerance
(swissborg.com)