Wealth management combines other financial services to address the needs of affluent clients. Using a consultative process, the advisor learns information about the client’s wants and their specific situation. Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than that received by average clients. Portfolio investment techniques that provide individuals with after-tax returns that meet their objectives must address such taxes. Wealth management can be provided by independent financial consultants who design services to focus on high-net-worth clients.
What is Wealth Management?
Wealth management is the process of making decisions about your assets, sometimes with a wealth manager. This includes but isn’t limited to, financial investments, tax planning, estate planning and other financial matters. The goal of wealth management is to help you achieve financial security and grow and protect your wealth. Managing your wealth is important, so whatever method of wealth management you decide to go with should be based on your individual needs and goals. Wealth management brings together tax planning, wealth protection, estate planning, succession planning, and family governance. Wealth managers tailor a personalized strategy that uses a range of financial products and services. Wealth management brings together tax planning, wealth protection, estate planning, succession planning, and family governance.
The Functions of Wealth Management
Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than that received by average clients. Individuals are more likely to face a variety of taxes on investment returns that vary by locality.
Portfolio investment techniques that provide individuals with after-tax returns that meet their objectives must address such taxes. Wealth management can be provided by independent financial consultants whom design services to focus on high-net-worth clients.
The Risks of Investing
- Currency Risk: The change in price of one currency relative to another
- Financial Risk: The dollar or percentage decline an investor can accept
- Fundamental Risk: Problems with the corporation or the industry in which it operates
- Inflation Risk: Erodes purchasing power
- Liquidity Risk: Not enough cash to meet immediate needs
- Longevity Risk: Outliving your money
- Market Risk: Experience losses by selling at the wrong time
- Valuation Risk: The original purchase price is too high
Wealth Management Strategies
- Asset Allocation: The process of dividing an investment portfolio among different asset categories, like stocks and bonds
- Diversification: A risk management technique that involves investing in a variety of assets to minimize the impact of losses in any one particular asset
- Rebalancing: The process of realigning a portfolio’s assets to maintain the original risk/reward ratio when things shift
- Tax-Loss Harvesting: A strategy used to minimize capital gains taxes by selling securities that have experienced losses and replacing them with similar investments
Fees for a Wealth Manager
Advisors can charge for their services in several ways. Some work as fee-only advisors and charge an annual, hourly, or flat fee. Some work on commission and are paid through the investments that they sell. Fee-based advisors earn a combination of a fee plus commissions on the investment products that they sell.
Strong investor demand and higher expected returns make alternatives an attractive option in an environment of low management fees, low interest rates, and increasing competition.
Trends Fuelling Canadian Wealth Management
- Management fees are declining and a growing list of FinTech companies and non-traditional competitors are entering the industry
- Investors now expect modern and personalized digital wealth management services. On the investment side, asset managers are seeking capabilities in areas with higher potential returns
- As wealth managers and advisors retire, there are opportunities for asset managers to acquire clients, AUM, and new service offerings
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