What is Wealth Management?
Wealth Management is defined as an investment-warning practice which incorporates elements from a variety of monetary disciplines including however not limited to investor portfolio management and budgetary arranging. In like manner practice, such services are offered by budgetary services companies or credentialed specialists (CFAs, CAs, etc) to private ventures, family owned enterprises and perhaps in particular to high net worth people.
The essential objective of wealth management services is to develop the existing wealth over the long haul. The most widely recognized type of wealth management looked for in India just as all around is the private wealth management service that is provided to HNIs (High Net worth Individuals).
Wealth Management Services for Individuals
Wealth management services are most normally searched out by high net worth people (HNIs) both in India just as over the world. Numerous HNIs have complicated investments including overseas assets, which necessitate the use of professional assistance, for example, those provided by professional wealth managers. Normal aspects of wealth management services provided to people include:
- Hedging of derivatives
- Venture capital Investment
- Investment opportunities Planning
- Real Estate Planning
With the increase in wealth of the top 1% over the world, HNIs have started demanding greater personalized attention leading numerous associations to form specialized divisions dedicated to personalizing wealth management answers for their top (richest) clients.
Elements that Private Wealth Managers Need to Consider
When giving private wealth management services, coming up next are some of the key factors that the wealth managers need to consider:
- Investment Time Horizon:
The time skyline of investment tends to differ starting with one individual then onto the next, and starting with one organization then onto the next. While one investor may be perfectly agreeable to invest for extensive stretches of over a decade, others may have a lot shorter time skyline as a main priority. At the base of this variety is the way that an individual regardless of how rich or powerful, has a finite life range. This is as a distinct difference to associations that have the same rights as people which theoretically have an infinite lifespan.
Wealth managers need to consider not simply the aggregation of wealth for their clients yet additionally make arrangements regarding the transfer of wealth toward the end of the person’s life.
- Multiple Tax Considerations:
High Net Worth Individuals for the most part have overseas interests which makes them liable to pay taxes on their benefits that differ starting with one nation then onto the next. The wealth manager needs to consider every single such interest separately, considering the different taxation methodologies and rules that are applicable in the nation of investment. Wealth management in this manner incorporates different techniques of portfolio management that are capable of furnishing people with returns that are in line with the investment objective after all relevant taxation requirements have been managed.
How do Wealth Managers Manage Investors’ Wealth?
- Hazard Analysis:
This is generally the initial move towards creating a customized investment plan for the client. Hazard Analysis involves assessment of the client’s hazard tolerance capacity with respect to his/her finances. Key factors that determine this ability include current/future responsibilities, investment objectives, client personality and then some. These and other pertinent details of the client are utilized to create a comprehensive profile to develop an intensive understanding of the client’s hazard taking capacity.
- Asset Allocation:
After completion of the hazard examination step, the wealth manager just as the client ought to have a better understanding of what chance return relationship would be generally suitable. The money related consultants and wealth managers are expected to create an appropriate designation intend to ensure appropriateness with the hazard reward requirement of the client. The recommendations along these lines made would feature conveyance of the client’s available/investable capital across key asset classes including yet not limited to real estate, equity, debt, alternative investment funds, etc. so as to maximize returns while dealing with the overall portfolio chance.
- Investment Products:
Wealth managers in India often have close working relationships with leading banks, which ensures that they have access to a wide range of investment avenues. Beyond the discovery of investment alternatives that already exist, wealth managers would likewise attempt to provide specialized investment items that might be uniquely suited to the client’s needs. The mix of different conventional and specialized investment items would change starting with one client then onto the next permitting a serious extent of customization.
- Investment Process:
Wealth management commonly involves achieving both present moment and long haul money related objectives. This is generally achieved through investment warning help services that permit investors to access momentary opportunities in a flexible manner. At the same time, they would ensure that drawn out investment vision of the investor is additionally kept at the top of the priority list when selecting investment choices.
- Research and Execution:
Crafted by the wealth manager does not end with the client making the chosen investments. The wealth manager would likewise be involved in keeping a close watch on the performance of the different investments over a period of time. Much of the time, the client would continue to receive extra reports that use both qualitative and quantitative techniques to ensure that the portfolio is correctly executed. This is especially significant considering the wide range of hazard profiles, features just as variables that add to the overall complexity of a portfolio. This drawn out help provided by wealth managers assumes a basic role in ensuring that the objectives of the clients are met in the present moment as well as over the long haul.
An asset management organization is a firm which pools funds from the investors and invests it into different investment choices, for example, equities, debt, real estate, gold etc.
There can be multiple funds with different investment objectives managed by an asset management organization. An AMC is controlled by fund managers who originally set the investment objective, evaluate market hazard and reward profile and afterward decide the investment strategy.
For example, a debt fund of an AMC would basically invest in securities and government securities and the investment objective is to generate moderate returns however at insignificant hazard.
How Does an Asset Management Company Work?
While investing in an AMC, fundamentally you are investing in a fund managed by the AMC. The returns of the funds are market-linked and therefore depend on the performance of the fund. A well-managed fund can possibly deliver relatively higher returns.
In return, the fund would charge a little fee called a fund management fee. It is a prime source of revenue generation for the AMC. A fund is expected to generate competitive returns in its category to maximize its subscribers and hence, the revenue.
While selecting a fund for investment, the market reputation of the asset management organization assumes a significant role. Investors trust those funds which are managed by well-known and reputed AMCs. To strengthen its investor base and deliver quality returns, an AMC follows a comprehensive process. He is a list of every single necessary step than an AMC undergoes , so as to perform at standard with its peers:
- Efficient Asset Allocation: To keep up investors’ trust, an AMC needs to prudently invest their money in different types of investment instruments. Conveyance of assets among debt and equity depends on the market conditions and prospective interest rates. Professional expertise and experience of fund managers assumes a great role in efficiently assigning resources to different asset classes.
- Formulating an Investment Portfolio: Constructing an investment portfolio is the most pivotal decision an AMC takes. It involves an exhaustive measure of research and investigation to formulate a hazard – adjusted portfolio, which won’t underperform even during turbulent market swings. Facing calculated challenges in case of equities and investing in exceptionally rated securities is the way fund managers build a portfolio.
- Assessment of Performance: The AMCs are answerable to its investors and trustees for its investment decisions. For this, periodic assessment of fund performance is done thinking about the fund returns, NAV Value, asset distribution, etc. This review sheet is available to all the investors and trustees of the AMC.
Common funds, Index Funds, Exchange Traded Funds (ETFs) etc are altogether examples of different types of funds managed under an umbrella AMC.
Who Regulates AMCs?
An Asset Management Company (AMC) is regulated by the capital market regulator, Securities and Exchange of India (SEBI). Further, AMCs are likewise passively regulated by the Association of Mutual Fund of India (AMFI) so as to protect the interests of the investo
