Last Updated on May 24, 2022 by Aradhana Gotur

Wealth management is a specialized type of financial management that encompasses customised plans for protecting existing wealth as well as growing wealth over time. While financial planning is important for every individual, high net worth individuals generally opt for wealth management services offered by instructions or qualified wealth managers. A wealth manager is an expert on various financial aspects such as taxation and investment with the requisite infrastructure for investing and portfolio management. Let’s dive deep to further understand the nuances of wealth management.

What is wealth management?

Wealth management is a form of financial advisory. It is a consultancy service that is given to individuals and companies, specifically for money-management functions such as investment, taxation, estate planning, and even assisting the treasury functions of small companies. 

Generally, high net worth individuals subscribe to wealth management services. Wealth managers are versed in the financial nuances of the wealthy and are educated and qualified to provide customized services to HNIs. For instance, if an individual wants to strategize and do estate planning, the manager will guide him or her through the step-by-step procedure. 

Wealth managers are a little bit heavier on the pocket to engage than financial planners. Wealth managers generally work on a pay as a percentage of asset managed basis, normally around 1%.

How much money should an individual have to avail wealth management services?

There is no specific answer to this question. Wealth managers are hired by high net worth individuals who would have a larger portfolio that requires managing. That said, there is no specific definition of who a high net worth individual is. A commonly accepted threshold now is that HNI is individuals with more than $10 mn or Rs. 45 cr in liquid assets. 

Wealth managers have to keep investors’ financial goals and risk appetite in mind before making any investment. Note that if you want Portfolio Management Services (PMS), most organizations and managers have a requirement that the minimum investment amount is in the range of Rs. 50 lakh. 

Also, the services offered by wealth management firms vary from place to place and organization to organization. They depend on the spending and saving habits of the client. If the client is from a Tier 1 city, the client’s spending habits would be different compared to an investor from Tier 2 city, and no two plans are alike.

Is it worth having a wealth manager?

When the investible amount is large, the risk from investment is equally high. This is why engaging professionals and experienced hands to handle and generate returns on your wealth is a prudent measure.

While financial planners and wealth managers provide similar services, the difference lies in the depth of services. For an HNI, a professional wealth manager is a lucrative option for tracking all your investments and assisting with estate planning, taxation, and new investment avenues whereas a financial advisor/planner would generally be an individual or small consultancy with limited experience in large family estates.

Engaging wealth managers or financial advisors must be considered as an investment rather than as an expense.

Wealth management vs. portfolio management

Wealth management is a broader concept. It includes the entire financial planning and structuring of an individual. Wealth management includes budgeting, estate planning, taxation, investment advisory, retirement planning, and many more strategies to comprise a comprehensive financial plan. 

In the case of portfolio management, the service is restricted to matters of investments. A portfolio manager assists you in creating and monitoring the investment portfolio as per your risk appetite and amount of capital.

Future for wealth management in a country like India

India is witnessing a surge in the number of high net worth investors and individuals. As per data, the number of high-net-worth individuals increased in 2020 at a 5.9% rate. The increment is far better than the average increase in the Asia-pacific region.

Based on another survey, India occupies the 4th position in having HNIs in the Asia Pacific. Among all UHNIs, around 56% comes from the business sector, while the salaried class accounts for 14%.

This points to the scope in the segment and the importance of wealth management for individuals.

Changing face of wealth management in India

The wealth management industry is well equipped with technology. The acceptance of technology-related services will reduce the cost of targeting Tier 1 and Tier 2 cities. Wealth management firms can use AI and technology-driven tax reduction methods, which will reduce human intervention. Firms in turn will be able to increase their reach and target more clients.   

The wealth management industry is shifting its focus from packaged offerings to providing customized offerings. For instance, if an HNI wants a credit solution, then from a pool of investors that the wealth management company has, they help the HNI as required. The demand for these customized wealth management solution services is expected to rise in the coming future. And therefore, a rise in another vertical will help wealth management companies earn more profit and cater to new clients. 

Moreover, the demand for wealth managers is expected to increase in the coming years. As the Indian economy grows, so will its requirement for better portfolio and wealth management.

Advantages of wealth management

The wealth management firm offers various customized features. Firms combine several financial products as per the client’s needs. Investors can choose specific services per their wealth management services.

Wealth management is a comprehensive service that encompasses all aspects of money management such as budgeting, taxation, investment, estate planning, and more, generally offered to high net worth individuals. 

Wealth management in India is witnessing phenomenal growth. As the number of wealthy increases, so does the need for financial planning. For the longest time, only HNIs were believed to require wealth planners. But in coming years, this number and also the people requiring their services are expected to increase exponentially. India has already surpassed Japan in this arena. This only further lays emphasis on the upcoming boom in wealth management.

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