Overview of Wealth Management

Wealth Definition Wealth means the condition of well being  Wealth is the present value of all future cash flows from financial assets and real assets  Wealth management refers to passive income and not active income   .

Income client needs for living.  Income tax considerations .   Humanitarian pursuits .  Inheritance goals . needs for children-dependants.To whom the client wants to hand over their money and how much control to grant upon potential inheritor-heir.The timing of Stock or Bond purchases and sales might affect total tax liability.Wealth management issues Current life style needs .)     .The clients liking for charities-gifts (also determining any tax benefits to the client. short and long term goals.

Phases in wealth management process Understanding Opportunities and Issues Planning Wealth Management Strategy mplementing the Wealth Management Plan Supervising and Monitoring .

A. b.Understanding values. They should define their comfort zone that helps in appropriate asset allocation. Understanding Opportunities and Issues a.Investors know thyself  Each investor is unique and should know his financial goals. goals and needs –  Where am I (in financial terms)?  Where do I want to go?  How do I get there? .

A. Understanding Opportunities and Issues c.Developing rational investment expectations  The goals of a customer must be reasonable  Their expectations must be based on their riskreturn profile .

Planning a wealth management strategy a.Impact of taxes  Impact of taxes on wealth management strategy must be closely looked into b.B.Developing an investment policy  Help clients in determining their specific goals including their hidden goals  Evaluate the existing portfolio of the client  Determine the cash flow needs of the client  Determine the constraints  Determine the risk tolerance level of the client  Develop an asset allocation plan .

type of securities are to be chosen to create the investment portfolio  Market timing decisions – wealth managers depend on technical analysis tools to decide on the timing of entry and exit from securities .Importance of asset allocation  Three decisions that influence the portfolio performance are  Asset allocation decisions – asset allocation is dependent on the wealth manager’s assumptions about the financial markets. Planning a wealth management strategy c.B. client’s goals and constraints  Security selection decisions – depending on the risk profile.

Integrated wealth planning  This   refers to three different disciplines – estate planning.B. Financial planning refers to cash flow needs in the present and the future Investment planning deals with the selection of investment strategies . financial planning and investment planning. Estate planning deals with transfer of wealth across generations in the most tax efficient manner. Planning a wealth management strategy d.

Supervising and Monitoring Process  This is a continuous process to see if the initial plan is producing the desired results or not.C. . The financial plan needs to be altered in case of deviations.

use of derivative instruments. . Implementing the wealth management plan  It involves important issues like market timing.D. and initial portfolio funding. tactical portfolio rebalancing.

financial services.000 HNWIs are there in India (compared to 8. retailing.Wealth management market in India  Demographics  Sustained GDP growth has created wealth in many sectors. UP and West Bengal  Mumbai alone accounts for 50% of the deposits held by foreign banks  High net worth individuals (HNWI) are defined as those with financial assets of atleast US$ 1 million excluding residential property. and BPO.3 million worldwide) .  Estimated 70.  GDP growth is concentrated in Maharashtra. like gems and jewellery.

Wealth Pyramid .

Major product offerings  Portfolio management services (PMS)  Mutual funds  Insurance products  Equity  Fixed income instruments  Real estate  Mortgage lending  Art funds  Derivates and structured products .

Key trends  Rapidly growing market  Clients becoming increasingly sophisticated  Open product architecture approach adopted by wealth managers  Wealth managers are looked upon as “trusted advisors” rather than “money managers” for their clients .

Key limitations  Market is in its nascent stage  85% of financial assets are still in the form of bank deposits  Low usage of technology tools by wealth managers  Shortage of skilled and experienced wealth managers .

she will be more likely to meet her financial goals. Smita is 22 years old and believes that if she makes the right financial decisions now. Smita has seen many people retire without enough savings to support themselves and does not want this to happen to her. She wants to make sure that she develops a plan for financial success. She has heard about the importance of financial planning in one of the guest lectures which was organized in her college.CASELET  Smita has just graduated from college and is starting her career.  . Her goals are to be able to retire at 45 years and live comfortably on her savings.

Do you think this is a good strategy for wealth creation?  .CASELET  What are some of the financial decisions Smita will probably have to make as a fresh graduate?  What are the advantages of starting early on her financial plans?  Smita is thinking about using a savings strategy based on paying all of her expenses and saving whatever is left at the end of the month.