Ace Investor Warren Buffet says, “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.”

On similar lines, in this article, we shall discuss what wealth management is, steps for wealth management, and other related concepts.

Read on!

What is Wealth Management?

Wealth Management is a very vast topic and has a broad scope. One of the primary motives of wealth management is long-term wealth creation. Wealth management is also considered a process of creating wealth where a dedicated professional guides you/assists you with solutions (financial products) to your financial needs. The entire process of wealth management includes wealth protection (risk management), wealth creation (investment management), and wealth distribution (succession/estate planning).

What are the advantages of Wealth Management?

  1. The plans are tailored and made as per the client’s specific requirement.
  2. Different financial products are combined to provide a holistic approach to the client’s requirements.
  3. Advisory services ensure that all advisors who receive confidential client information take proper care in protecting the client’s interest and that the information is not leaked/misused.
  4. Bundle of services including financial and accounting, tax management, investment advice, legal and estate planning are clubbed and provided to the clients for the better and desired outcome.
  5. Wealth management is different from investment advice. The former is broader and is a more holistic approach, while the latter is very specific, catering to one objective.
  6. Wealth management as a service is generally appropriate for wealthy individuals who have a broad array of diverse needs.
  7. An individual can render wealth management or a group of individuals part of a small-scale business or a more prominent firm.

Moving on, the following are some of the essential tips you should follow for properly managing wealth

Comprehensive budget

It is advisable to match your inflows against your expenses. This allows you to ensure you have all your needs covered.

Trimming recurring expenses

It is essential to identify areas where you can cut down some expenses that are not meaningful.

Reduce unnecessary costs

You can take control of your bills and reduce any penalty, fine, late fees by proper management of bills.

Focus on lowering debt cost

You can reduce your cost of debt either by focusing on paying off your high-interest cost debt first. Consolidating all debts into one financial institution also helps you in negotiation and availing preferred rate.

Set clear financial goals

As a part of wealth management practice, it is essential to jot down all your financial goals – short-term, medium-term and long-term goals. Each goal is different and comes with different risk-adjusted returns. Thus, a dedicated financial plan towards each goal shall help you achieve a financially free future.

Tax planning

There are ample ways you can save taxes. Thus, it is advisable to make the most of it and not to pay more taxes.

Golden rules for wealth management

We all want to be rich, but merely dreaming or aspiring isn’t sufficient for you to be rich. All of it will make sense if you act towards it. With a goal in mind and disciplinary execution, you can be rich. Following are some of the golden rules of wealth management.

Know the actual worth

Considered as the first step of financial planning, knowing your net worth helps you know about your assets and liabilities. Often it acts as an eye-opener for people who are not aware of their indebtedness.

Be safe, Be insured

Life always has different plans for you. While targeting to get rich is good, it is also essential to ensure your family is secured with that wealth. Thus, always get yourself and your family insured.

Know the product before opting

There are plenty of financial products available for investing. Never put your money in a product that is complex to understand. Investing requires you to understand the risk you are taking and if you align with your profile, financial position, goals, and objective.

Don’t put all eggs in one basket

This is the essential rule of wealth management. While the saying may be old, it will never lose its relevance. Avoid putting all your money in one instrument, product, scrip, etc. Diversification is equally important as investing. Diversification helps you preserve capital when the markets crash.

Patience is the key

One cannot become a millionaire overnight. It is a gradual process and takes time and hard work. It needs commitment and patience. Similarly, wealth management needs time and patience. Thus, you need to stay calm and hold on to your investments if the fundamentals are strong during market volatility. Volatility is an integral part of investment and shall come and go. All you need to do is tackle the same with patience.

Review your portfolio periodically

Patience is, of course, required, but at the same time regular check of the portfolio is required to ensure your portfolio is in sync with the current market trend and also reflects your risk appetite. If you find any deviation, feel free to make the changes to your portfolio to optimize as per your risk appetite.

To conclude, we can say that wealth management is a vast subject and doesn’t only deal with investment management or wealth creation. It is an amalgamation of various services such as wealth creation, investment management, taxation, estate planning, etc. When these are brought together, it falls under the broader umbrella of wealth management. Wealth management is critical and should be considered by every individual irrespective of income level and background. One may always choose to adapt to a specific section of wealth management, but it is essential to remain literate about one’s financial health.