By Shahriar Azad Shashi
The term “Wealth Management” is used in plenty nowadays but actual precise definition by most professionals is hard to find. Wealth management service in its simplest form can be defined as specialised investment management service for high net worth individual clients.
As per the definition given at Investopedia, “Wealth management is a high-level professional service that combines financial and investment advice, accounting and tax services, retirement planning, and legal or estate planning for one set fee”. So, given by the definition at Investopedia it can be said that wealth management is more than just investment advice as it can encompass all parts of a person’s financial life.
Idea of wealth management is increasing long term wealth in a sustainable manner. Instead of getting advice from various professionals on different aspects of personal finances, wealth management service provides HNIs with the ease of getting one stop service from her designated wealth manager. The beauty of wealth management service that makes it more client-centered is wealth management is consultative in nature.
Role of wealth manager is advising his/her clients with how to better manage his/her finances and plan their own and their family’s current and future needs based on the client’s risk tolerance. Since the wealth manager is not responsible for selling any particular product or service, conflict of interest typically does not arise (It may arise if the wealth management firm has own parent/subsidiary company that has various financial products such as mutual fund, retail banking products etc. We are thinking here wealth management firms are independent organisations). Wealth managers start by making plan that will increase the client’s wealth in a sustainable manner based on the client’s current financial situation, long term and short term goals and risk tolerance.
Wealth management is not a one time job so the wealth manager must meet the client periodically once the initial plant is made in order to update any changes in financial situation and goals. Based on the updates the wealth manager will review the current portfolio of assets and rebalance if necessary. The wealth manager must also investigate whether any additional services are required, the ultimate goal of wealth manager here is to remain in the client’s service throughout her lifetime.
Wealth managers can inundate clients with all the financial products available but that will not be a wise thing to do since the client will get perplexed. In order to better serve the client understanding the client’s need first is of paramount importance. A client may visit a wealth manager with a specific problem but understanding the person and what actually is important for the person should be the objective of the wealth manager. Based on the understanding appropriate advice should be served instead of providing her with all the available financial products.
Financing solution for a to be retired person or a person just in job must vary and it is the duty of wealth manager to offer customized service for each individual and not to forget based on the risk profiling. Risk profiling is very important and wealth manager must express various risks associated with various financial products. Theoretically wealth managers can provide advice on any type of financial services but in practices many specializes in particular area. For example there can be wealth manager who can provide you advice on mutual funds only or there can be mortgage specialists who can help you choose the least cost source of mortgage financing or there can be tax specialists who can provide you tax based services.
In the first case a single wealth manager will take care of all type of needs of a client and in the second case the client will have access to a number of specialists from a wealth management team. Wealth management service is yet non-existent in Bangladesh although the term has got popularity in recent times. We hear the term in various investment management companies as well as in banks now but full-fledged service has not started yet. With the growing popularity, we expect the services will start in Bangladesh soon.
[The writer is fund manager of LankaBangla Securities Ltd]