Wealth management is a relatively new profession, so it’s not surprising that most people are vague about what wealth managers actually do.
Wealth management addresses a wide range of issues. A wealth manager can help you with such issues as: investing a lump sum, deciding how much you need to save in order to retire comfortably, dividing up pension entitlements on a divorce, getting the right types and amounts of life and health insurance and planning to pay for education fees.
These are crucial issues for most people and their families, and it’s very important for a wealth manager to have a thorough understanding of clients’ aims and challenges.
Getting to know the client
Initially the wealth manager and client must get to know each other well enough to decide whether to take the relationship further and the best way for it to work. This will involve agreeing the broad content and scope of the service and crucially how much it will all cost. There’s likely to be an enormous amount of information to be gathered together about a person’s financial circumstances: savings, investments, property, mortgages, wills, pensions and much more.
The planner’s job is to find out what the client wants to achieve with their money, both now and in the future. That means gaining a thorough understanding of their views about such issues as borrowing, investing, spending now and in the future, retirement and estate planning.
In investment terms, there will be specific questions about the level of risk the client is prepared and able to take on. That will lead to discussion about how various asset classes have behaved in the past and what they might do in the future. The aim is to build a portfolio of investments that will provide the returns the investor requires and with which they are comfortable.
Making a plan
The next step in the planning process is to make sense of all this information and come up with a range of preliminary conclusions and initial ideas for ways forward.
An important aim of the analysis stage is to identify financial gaps or shortfalls. These could be between income and expenditure now or in the future, pension or insurance provision and others where some action is needed to bridge the gap between aspiration and reality.
You might need to change your goals and aspirations and you may also need to adjust some of your current patterns of behaviour such as spending and saving. A very important issue is clarity about priorities – what might have seemed to be a high priority at the start of the process might have to be replaced by another need.
Finding the right products
Once these needs and wants have been identified, it’s time to do some specific research into funds, tax wrappers and insurance products.
Wealth managers will, as required, work with other professionals such as lawyers and accountants, who can provide specialist legal and tax advice and help with the implementation of aspects of the plan.
Most clients want their adviser to keep an eye on their investments and other financial arrangements; so regular reviews and communication are important. The review process is intended to act as a catch up with what has changed – either in your own circumstances or in the financial world generally.
It is possible to carry out your own wealth management if you have the knowledge, time, patience and self-discipline. But there are good reasons why you probably won’t want to – even if you have all these characteristics. You may also find it hard to make these big decisions alone. If you’re unsure talk to wealth management specialists, St. James’s Place.
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