Five Reasons You need A Wealth Manager
Wealth management is not the same as investment management. Investment management is more or less limited to picking the best stocks, government securities, corporate bonds and mutual funds (a pooled investment fund with exposure to equities or bonds or a mix of the two). Some banks offer investment management solutions, throwing their savings accounts into the mix.
Wealth management differs from investment management for three reasons. first, wealth managers will get actively involved in retirement planning and changing your investment profile based on where you are in your life cycle—the younger you are, wealth managers may allocate riskier, higher-yielding asset classes like stocks, while older clients will get more stable investments that yield fixed returns. To do this effectively, wealth managers build closer relationships with their clients and walk through life with them.
Second, wealth managers don’t just allocate and manage your funds. They will coordinate with your accountants and lawyers, planning your taxation, legal and insurance requirements. In sophisticated markets like the US, they help professionals like doctors take out optimal insurance policies as protection from suing patients.
The third difference is that wealth managers strive for tax efficiency, picking investment options that minimize unnecessary tax liabilities— not to be confused with tax evasion. This function may not really apply here because investment options are rather limited at the moment.
Elsewhere, many people lay claim to being wealth managers, although many are more or less confined to investment management, but for an uncomplicated market like ours, with few investment options, even they will do. don’t forget to factor in the fees and your ability to switch between wealth managers before you take the step.
Why you need a wealth manager:
Preserving and growing your wealth: You have inherited wealth or you may have made it on your own; either way, you want to preserve this wealth and grow it for generations to come. Land and houses are generally appreciating assets, but what do you do with stuff like old cars, antique furniture and those paintings that haunted you as a child but now fill you with warmth? Do you sell them off and put the money in the bank or buy property? Or can these be assets by themselves? Should you invest in art? Wealth managers can help you with this. For example, art is emerging as a long-term investment option in Sri Lanka and wealth managers can help identify good art that will appreciate in value over time.
Making your nest egg: You’re driven to succeed and working hard at it, making enough to lead a comfortable lifestyle that allows an occasional splurge. So how much must you save now to maintain a similar lifestyle or even better after your work is done? You need a retirement plan, and it must ensure two things: first, inflation must not bring down the real value of your savings, and second, your savings must not turn into an ATM you can chip away at after you retire. Wealth managers ideally factor in all this so you can set aside enough without impacting too hard on your lifestyle and advise on how best to invest the savings in a range of asset classes that will optimize returns.
You don’t have the time: You’re in that stage in life where your career is your priority, or you are balancing work and the care of children and elders. Whatever it is, time is a luxury. Managing your investments require time. You need to follow markets closely, pore over financial reports and economic data, and talk to people connected with your area of interest. Wealth managers commit to spend time on your behalf, so you can devote yourself to your career, family or passions.
You don’t know how or what: Investing in equities is complex. You need to buy the right stock at the right time, and know when to hold and when to let go. But how much equity do you hold? The same goes for less riskier assets like bonds. Even land has a good time to buy and sell. A basic understanding of how markets work is helpful, but is not going to cut it. Wealth managers have the experts on-board who will take a bird’s eye view of the economy and hold a magnifying glass to all its parts to make sound investment decisions for you.
Optimizing your returns: It’s easy to get caught up with tunnel vision. You can keep your savings locked up in a bank vault or divvy it up with equities, bonds, property and exquisite pieces of art. You can play it safe and trust the bank, but your savings will have no room to peak. Inflation will eat into your savings by the time you retire. You can go on the offensive and chase equities for higher returns, but so are the risks, as an asset bubble could wipe out wealth in the blink of an eye. Wealth managers rely on a carefully allocated portfolio of assets to optimize returns so that your nest egg is strong enough to generate steady income flows when your work is done.