Wealth management is a specialized form of financial planning designed to both preserve existing wealth and expand it over time. While financial planning should be carried out by everyone, high-net-worth individuals (HNIs) often turn to professional wealth managers for advice and services provided through qualified wealth management experts. A qualified wealth manager possesses expertise in taxation and investments and has the infrastructure dedicated to managing the portfolios of investors. Let’s delve deeper to gain a fuller understanding of wealth management!

What Is Wealth Management?

Wealth management is a type of financial advisory service provided to both individuals and companies for money-related decisions such as investments, taxation, estate planning, or even assisting small companies with their treasury functions.

High-net-worth individuals typically utilise wealth management services. Wealth managers specialise in handling the finances of HNIs and are well-versed in providing customised services tailored specifically for them, such as estate planning. If an HNI wishes to strategise their estate plan step-by-step, their wealth manager will guide them through the process.

Wealth managers tend to cost more than financial planners, usually operating on a fee as a percentage of assets managed (typically around one per cent).

What Funds Must an Individual Possess Before Engaging Wealth Management Services?

There is no definitive answer to this question, although wealth managers are typically hired by high-net-worth individuals with large portfolios that need managing. While there is no universally accepted definition of a high-net-worth individual (HNI), a commonly accepted threshold is those possessing more than $10 million or Rs 45 crore in liquid assets.

Wealth managers must consider investors' financial goals and risk appetite before investing. Most organisations and managers require a minimum investment of Rs 50 lakh when using portfolio management services (PMS).

Wealth management firms may vary significantly based on location and clientele. Services can differ based on clients' spending and saving habits; investors from Tier 1 cities may have different needs than those from Tier 2 cities. Therefore, no two plans can ever be identical.

Does It Pay Off to Hire a Wealth Manager?

With more significant investments come increased risks. Therefore, engaging experienced experts to oversee and grow your wealth is a wise decision.

Financial planners and wealth managers offer similar services, but the distinction lies in their level of service. For HNIs, professional wealth managers provide invaluable assistance when tracking investments, estate planning, taxation, and exploring new investment avenues. In comparison, an advisor or planner is generally an individual or small consultancy with limited knowledge of large family estates.

Engaging wealth managers or financial advisors should be seen as an investment rather than an expense.

Wealth Management vs. Portfolio Management

Wealth management is an umbrella term that refers to all financial planning and structuring activities related to an individual. This may include budgeting, estate planning, taxation advice, investment advisory services, retirement planning strategies, and many other strategies designed to create a comprehensive financial plan.

Portfolio management services focus solely on investments. A portfolio manager assists you in designing and overseeing an investment portfolio tailored to your risk profile and capital allocation.

Wealth Management in India

India is witnessing an impressive upsurge in high-net-worth investors and individuals, increasing by 5.9% year-on-year, far outpacing other Asia-Pacific regions' average growth. According to a survey, India ranks fourth in Asia-Pacific when it comes to the number of high-net-worth individuals (HNIs). Of all ultra-high-net-worth individuals (UHNIs) in India, approximately 56% are from the business sector, while 14% come from salaried classes. This indicates the immense scope and significance of wealth management for individuals.

Changes in Wealth Management in India

India's wealth management industry is well-equipped with technology. Technological services are reducing costs associated with targeting Tier 1 and Tier 2 cities. Firms using artificial intelligence or technology-driven tax reduction methods are decreasing human intervention while expanding their reach to more clients.

Wealth management companies are shifting from offering packaged services to providing tailored solutions. For example, if an HNI requires credit assistance, their wealth management company can deliver it from a pool of investors. Demand for such customised Wealth Management Services is expected to grow, creating additional verticals that help wealth managers earn more profit and serve new clients.

Demand for wealth managers is expected to rise as India’s economy expands and more people seek better portfolio and wealth management solutions.

Advantages of Wealth Management

Wealth management firms provide many customised services, combining various financial products based on client requirements. Investors may select specific services according to their wealth management needs.

Wealth management services typically offered to high-net-worth individuals cover all aspects of money management, such as budgeting, taxation, investment management, estate planning, and more.

Wealth management in India is experiencing phenomenal growth. As the number of wealthy individuals increases, so too does their need for financial planning services. For a long time, only HNIs were thought to require these services, but in the coming years, their numbers and the number of users will increase exponentially. India is expected to surpass Japan in this arena, further emphasising its rapid development as an emerging field for wealth management services.

Conclusion

Wealth management services are no longer solely limited to India's ultra-wealthy. As India's economy develops and the number of high-net-worth individuals increases, demand for personalised financial planning and advisory services will only continue to increase. Wealth managers who embrace technology can leverage it to offer customised solutions at lower costs, expanding their clientele across different regions. Wealth managers play an indispensable role in helping individuals secure and grow their wealth. As this industry evolves, investors and wealth management firms alike have opportunities to thrive within an increasingly dynamic financial landscape.