Wealth management is a process where an affluent individual can create better alpha on their
existing portfolio. Wealth management is generally done for those individuals who have an existing
investment portfolio and they are seeking better returns over their portfolio by way of asset
diversification and better allocation.
Wealth management varies with respect to the individual’s perspective. For affluent individual wealth
management can be considered as a well studied strategic process that is used to solve and increase
his or her financial position. Concerned individual trusts a financial adviser to have an insight of their
financial position and come up with a plan to manage it that will ultimately result in a better
outcome/situation, than the one that they started with. From an Advisor’s perspective, wealth
management looks different. It’s the ability to look at and understand a client’s financial position.
After thorough understanding and analysis, advisor attempts at utilizing a full range of financial
services and products to put together a plan that works to improve the finances of the affluent
What is the difference between Financial Planning & Wealth Management?
A financial plan helps define unique goals and objectives and helps create a strategy on how to
accomplish those goals. With a comprehensive evaluation of an individual’s financial goals and
financial state, and by using currently known variables, projections (generated by a financial plan) an
advisor can illustrate the future financial state. These variables can include cash flow, income versus
expenses, asset values, withdrawal needs, net worth, tax liabilities, asset allocation, retirement plans,
estate plans, etc. While determining the current and future state of a person’s financial position, the
plan also addresses steps that can be taken to change and increase the probability of success in future.
Wealth management can be considered as the outcome of a well-executed financial plan. In a
simplistic definition, it is the management of wealth, which means a person needs wealth in order to
need wealth management services. Wealth management is the consultative process of using
investment strategies to help meet the needs and wants of clients by providing the appropriate
financial tools and services. Wealth Management helps in increasing better return on pre-existing
portfolio by using different investment strategies and tools.
Financial planning usually means creating a strategy for accumulating wealth for retirement or
specific personal goals. Wealth management focuses on managing financial assets with a
performance level in mind. Wealth Management, in Comparison, considers the total net worth of a
family, a couple or an individual. It weighs financial decisions in light of an investment portfolio and
additional components of the financial picture at large.
Advantage of Wealth Management services
Expertise: The primary advantage of Wealth management is the expertise that wealth
managers bring to the table and the ability to implement their expertise to client’s individual
needs.Wealth management expertise should also include the ability to accurately profile
clients, based on feedback received during discussion. Client profiles should not only include
client’s wishes and unique specifications but should also define client’s risk capacity and risk
tolerance. Based on client profiles, assets are then allocated to suitable and risk-adjusted
investment vehicles such as stocks, bonds, mutual funds, commodities, AIFs, PMSs or fixed
Executing and monitoring investments: Wealth managers are responsible for the
execution and monitoring of each investment strategy. They should know exactly where and
when investment products should be bought or sold to deliver the highest profits and manage
all transactions on their client’s behalf. Investment portfolios should be monitored and
rebalanced (adjusted) when necessary.
Exclusive access: Some Wealth managers have exclusive access to investment vehicles
that are not available through other channels. These may include specific company shares,
stocks, theme-based products, PMSs & Structured product which have not yet been made
available directly to investor, or difficult-to-access information or consultation. There are few
products that need extensive understanding of theme and are available exclusively to limited
A one-stop solution: Wealth managers often provide integrated, full-service solutions. In
addition to making investment decisions, many wealth managers also manage and coordinate
other wealth management services like tax consultation and optimization, retirement
planning and estate planning.
Time savings: The most important aspect is “Time”. Wealth management services
comprise primarily of management of investments on client’s behalf and hence saving client’s
precious time. The effort involved in researching market data and executing transactions
without the help of a wealth management service requires a significant amount of time and
effort – even for the experienced investor.
Limitation of Wealth Management Services
Costs: The cost of Wealth management services presents the biggest drawback. A number
of wealth management fees and charges may apply, and these can cut into your profits.
Prospective asset management clients are advised to request comprehensive quotes that
clearly outline all applicable costs before signing up for a wealth management service.
Information limitation related to asset or product: Many wealth managers provide
limited knowledge of assets or products they are investing in for the investor. This may be
disaster for an investor. To avoid this limitation, an investor should be in line with wealth
manager and should give emphasis on product-related full presentation including risk
associated with those products.
Too Much Dependency on Wealth Managers: Investors should not dependent 100%
on their wealth managers. It is an individual’s hard-earned money and he/she is also
responsible equally for any decision taken on his/ her behalf. The individual should track
portfolio at regular intervals and shouldn’t hesitate in inquiring about any decision made by
the wealth manager.
Investment Horizon: Time is a crucial factor in any investment portfolio. While designing
portfolio and taking decision on portfolio investment, investor should understand and follow
the time horizon suggested by wealth managers. Any mismatch in understanding of time
factor can result in a disaster in portfolio. Reviews and change in portfolio are also a crucial
part which generally gets affected by time horizon. So, one has to be accurate and aware of all
aspects of wealth management services before opting for it.
Wealth Management is an important tool & service for affluent individuals. Wealth management
services not only help in increasing returns but also help in reducing risk. It helps in foreseeing the
future and hence adapt current steps accordingly. It’s a professionally managed service that leads to
better management of money and money matters. Every service has its own advantages and
limitations but if used effectively than it can create miracles.
“MONEY GROWS ON SKILLS NOT TREES” ― MAC DUKE
Disclaimer: All views expressed in articles are of Mr. Rohit Khandelwal. He is AMFI & IRDA registered advisor. The
author doesn’t hold any responsibility towards any accuracy of data or parameter. For any investment advice, kindly call your registered financial advisor and before investment, kindly read the offer document carefully. Moneymatters and its employees don’t guarantee any returns as assured returns.