Wealth management is an investment discipline which means looking after assets or cash in a professional way. It means looking after what wealth you have and helping it grow.
In the UK reference to Wealth Management often relates to a discretionary management service rather than an advisory one. However some firms use the terminology when dealing with clients with significant assets who require a more rounded or hands on service.
Investopedia.com observes that, "Wealth management is a high-level professional service that combines financial and investment advice, accounting and tax services, retirement planning, and legal or estate planning for one set fee."
Wealth management centres on investment. So many wealth management products provide ways of investing.
Each investment product comes with different levels of risk and reward. This balance is often referred to as the risk/reward ratio.
Government bonds are a wealth management product with a low risk/reward ratio. As a conservative investment, bonds generally offer a low risk of losing your money but an unspectacular return. Money invested in a bond needs to be held until the bond matures for the full amount (plus interest) to be recouped.
More risky than bonds are equities (stocks). As a wealth management product, shares in a company offer many advantages, but also a great deal of risk.
Mutual Funds are perhaps one the best known wealth management products. Mutual fund managers use their professional expertise to invest a pool of money from individuals into a custom portfolio – and all investors benefit from any gains made (and suffer any losses too).
Exchange Traded Funds (ETFs) are like Mutual Funds, but with the difference that an individual may sell their share in an ETF on the open market – as an asset in itself. ETFs have attracted a good reputation for low fees and easy accessibility.
Wealth management is generally offered as a holistic service. This means that the service aims to make all parts of your finances work together to create an effective whole. Your wealth manager will be aiming to join up five key areas:
This means developing what you have, as well as having enough to support your lifestyle. Wealth preservation centres on investing.
This means minimising the impact of taxation, particularly estate taxes (ie. taxation on your assets when you die) and capital gains taxes (ie. taxation on your assets when they rise in value).
This means passing on your wealth efficiently to your heirs; planning your legacy.
This means protecting your wealth against a range of threats: catastrophic loss on the markets, creditors, litigation, identity thieves, hostile family members and anything else that poses a risk.
Charitable giving on a significant scale comes with its own challenges. Two big issues that wealth managers can help with are choosing who to give to, and what financial instruments to use to make the giving work for everyone. Trusts are often involved here.
Holborn Assets can offer a financial planning service to clients seeking wealth management. We will work closely and coordinate with a range of multi-disciplinary professionals to manage your wealth effectively.