People often assume a wealth manager only serves affluent clients. That notion may have been true earlier, but things have changed. Today, a wealth manager is relevant to almost anyone who wants to build a secure financial future.
Life brings so many challenges that undermine long-term wealth creation goals. Inflation erodes our purchasing power, while lifestyle inflation pushes expenses higher. Taxes also take a hefty share of our income, and high-interest debt can grow quickly if not managed well.
All these factors make saving and investing quite challenging. A wealth manager brings the different parts of your financial life together. They help you achieve life’s biggest goals by creating a plan that fits your financial profile. Let’s understand the role of a wealth manager and why everyone should consider working with one.
What is Wealth Management?
Wealth management is not only about investing money for growth. That’s certainly an important part, but it’s not the whole picture. True wealth management also focuses on preserving what you’ve built and creating new avenues for growth.
For example, earning good returns on your portfolio will help you create wealth. But without proper tax planning, those gains can shrink. Similarly, if you don’t protect yourself and your assets with the right insurance, unexpected events can erode your wealth.
This is why wealth management companies take a holistic approach. They look at your complete financial life and bring everything together into one well-structured plan. Their range of services can include:
Investment Management
A core part of wealth management is helping you invest wisely. Wealth managers analyse your finances, goals, and risk appetite to recommend investment options. They create a diversified portfolio designed to grow your wealth while managing risk. They also hold regular reviews to ensure your investments stay aligned with your goals.
Risk Management Strategies
Wealth managers develop strategies to protect your wealth from life’s unpredictable nature. They aim to prevent a single adverse event from derailing your long-term plans. Strategies to manage risks include insurance planning, diversification, and emergency funds.
Tax Planning
Taxes are often a cause of stress because they can significantly reduce your savings and investment returns. Wealth managers help you legally save more of your hard-earned money through different strategies. These include tax-saving investments, deductions, exemptions, and salary restructuring. They also ensure timely filing of taxes to keep your finances compliant.
Retirement Planning
Wealth managers help you estimate the amount needed to retire comfortably and recommend suitable investments to hit that target. They also create strategies to ensure you earn a stable income once you stop working.
Estate Planning
Ensuring you pass on your wealth smoothly and according to your wishes is important. Improper estate planning can lead to your wealth being distributed in unintended ways. Wealth managers play a vital role in this transfer process. They help you draft wills, set up trusts, and coordinate with lawyers to minimise complications. By doing so, they ensure your assets reach the right beneficiaries.
Wealth management servicesEssentially, a wealth manager assesses your financial situation, goals, and risk appetite to create a personalised strategy. The best part? Their expertise is not reserved for individuals with crores in their bank accounts. Anyone looking to make the best use of their surplus can benefit from a wealth manager.
Benefits of Hiring a Wealth Manager
Here are some reasons why a wealth manager can add value to your financial journey:
1. They Help You Assess Your Financial Situation
Everyone should have a clear perspective of their financial standing. A wealth manager analyses your income, expenses, assets, debts, insurance, and investments to arrive at your net worth. This metric is important because it helps you track whether you’re moving forward, staying stagnant, or falling behind. This assessment gives wealth managers the clarity to set realistic goals and build plans that fit your profile.
2. They Create Customised Financial Plans
Everyone has unique financial circumstances, so it only makes sense that their plans reflect their needs. A wealth manager studies your goals, income, risk appetite, and horizon to build a personalised roadmap. This plan outlines everything. How much you should save, where you should invest, and how you should prioritise different goals. With this systematic approach, it becomes much easier to stay disciplined and track progress.
3. They Protect You From Financial Risks
Wealth protection is just as important as wealth growth. And since financial risks are all around us, this becomes a crucial part of long-term planning. Market volatility, unexpected medical expenses, job loss, and bad investments can set you back.
Wealth management services help you prepare for such situations through different strategies. For example, they ensure you have an emergency fund to deal with unforeseen events. They recommend suitable insurance for health and life. They diversify your portfolio to balance risk and return.
4. They Keep You on Track With Your Financial Goals
These days, it’s very easy to get distracted from our goals. New expenses come up, lifestyle inflation creeps in, and we tend to get lost somewhere in between. For example, a younger investor may think it’s okay to stop their retirement SIPs for a while because it’s far away. But such breaks reduce the compounding effect and push long-term goals further. Simply having a wealth manager can make you feel more accountable to your own goals.
5. They Reduce Your Tax Burden
Another way of preserving wealth is by cutting out unnecessary tax leakage. Many people end up paying more tax than needed because they don’t use the right deductions and exemptions. One of the biggest advantages of working with a wealth manager is that they help you structure your finances in a tax-efficient manner.
They recommend suitable tax-saving investments and strategies to legally minimise your tax burden. They also review your portfolio to ensure you aren’t paying higher taxes on profits.
6. They Help You Avoid Costly Financial Mistakes
When it comes to investing, it’s easy to get swayed by emotions. FOMO and social media chatter can push one into making impulsive decisions. And it’s not just investing mistakes. Not having an emergency fund, skipping insurance, or not using all available tax benefits can also be harmful.
A wealth manager protects you from such costly mistakes. They help you stay calm during volatility. They make sure your choices align with logical, personalised factors rather than emotion. They also ensure you and your loved ones are financially protected from unexpected events.
7. They Simplify Complex Financial Choices
Selecting the right financial products can be an unnerving task. And with so much misinformation floating around, it becomes harder to know what suits your needs.
Wealth managers can simplify products such as ULIPs, mutual funds, PMS, and insurance to help you make better decisions. They explain how they work, their pros and cons, and recommend options that fit your profile.
8. They Monitor and Adjust Your Plan as Life Changes
As life goes on, your goals and risk tolerance will evolve. Since your wealth plan depends on them, it also needs timely adjustments. A wealth manager reviews your plan regularly and updates it to match new goals.
9. They Save You Time and Reduce Financial Stress
Finances are among the biggest stressors for many people. Choosing investments, following budgets, filing taxes, and planning for retirement. It’s a lot, for sure. And these days, everyone is so busy with work or family that managing money can get pushed to the side. A wealth manager can help you share this burden by organising and handling the financial tasks that take up your time. Also, when you know that a trusted professional is looking after your money, you’ll feel more at peace.
10. They Help You Make Smarter Investment Decisions
Wealth managers have years of experience studying markets. They understand risks and which strategies suit which goals. Under their guidance, you can make the right investments and avoid mistakes. Their expertise will give you the confidence needed to create long-term wealth.
The Role of a Wealth Manager in Your Financial Life
Wealth management services play a crucial role in every area of your financial life. Here’s how:
Goal Setting and Prioritisation
A financial journey starts with setting goals. Answering ‘why’ you’re investing gives you purpose in every decision you make. Once you clearly define the ‘why’, it becomes easier to get to the ‘how’ – the strategies needed to achieve your goals. A wealth manager helps you clearly define these goals.
And then comes prioritisation. We are all chasing multiple goals at the same time. You may want to buy a home, plan for your child’s education, and build a retirement fund. While it’s important to achieve all these goals, urgency and importance differ for each person. A short-term goal like buying a car cannot be treated the same as a long-term goal like retirement.
We tend to almost ignore the non-urgent goals and fully focus on our immediate needs. Before you know it, the long-term goals get pushed further and further away. Retirement planning, for example, sometimes takes a back seat because it feels so far in the future. But does delaying it not make the target harder to reach? A wealth manager helps you identify, define, and prioritise your goals. They strike a balance between today’s needs and those of tomorrow’s. Putting realistic timelines on each goal makes it easier to decide how much to save and where to invest.
Investment Advice
Investing is perhaps the most important part of wealth management. It also happens to be one of the most confusing ones. There are a ton of financial products out there – from stocks and mutual funds to ULIPs, PMS, and much more. And with so much information everywhere, it’s tough to know what’s right for you.
A wealth manager simplifies this selection process. They sift through many products and recommend the ones that match your goals and risk tolerance. They explain why a particular investment makes sense for you. They’ll answer your questions to clear any doubt you may have. They’ll even compare different products and list their pros and cons to help you make the best possible decision.
Diversification
Diversification refers to the process of spreading investments across different asset classes and sectors. It is a powerful risk management strategy that helps you avoid significant losses. When a wealth manager constructs your portfolio, they ensure your money is across equity, debt, gold, and other assets, depending on your risk tolerance.
Diversifying too much can also be detrimental. If your investments are thinly spread, they’ll likely deliver diluted returns. Wealth managers help you find the optimal balance. Enough diversification to reduce risk, but concentrated enough to ensure meaningful returns.
Debt Management
Wealth cannot be meaningfully created with lingering high-interest debt. Many people struggle with home/ education loans and credit card loans. A wealth manager can review your liabilities and help you manage these debts sensibly. They’ll do so by suggesting strategies like restructuring loans or clearing high-interest debt first.
Insurance Planning
Insurance plays a huge role in preserving your wealth. Imagine not having a decent health insurance policy. A single unexpected hospitalisation can set you back by lakhs. Such a setback can be easily avoided with the right coverage. A wealth manager helps you choose policies that protect your health, life, and valuable assets. They make sure your insurance is sufficient and structured to take full advantage of available tax benefits.
Minimising Tax Outgo
The Income Tax Act offers various ways to reduce tax liability legally. The problem is that not many people understand which deductions and exemptions apply to their situation. A wealth manager brings some much needed clarity here. They can guide you on exemptions and the tax-saving investments that suit your goals. You’ll also get guidance on how to structure your portfolio in a tax-efficient way.
Since paying taxes is a yearly obligation, tax planning is a key responsibility of a wealth manager to help preserve your hard-earned money. Other than optimising deductions, they also ensure accurate, timely filing of taxes.
Reviewing Plans
As we discussed previously, your financial life won’t stay the same forever. Income will change. Responsibilities will grow. And hence, goals will shift. As markets also change, it’s incredibly important to keep an eye on your financial plan and make timely adjustments.
A wealth manager will schedule regular reviews at set intervals. It could be every six months or a year. They’ll discuss your portfolio’s progress, tax changes, and update strategies if needed. This is essential to ensure your plan remains aligned with changing goals and market conditions.
How to Select the Best Wealth Manager
Traditionally, wealth management companies served high-net-worth clients exclusively. In recent years, however, many firms have started offering services to a wider range of investors. The minimum investment required to avail of these services varies from firm to firm. That’s why the first step is to determine your investible surplus before beginning your search.
Once you have that picture, you can shortlist wealth managers based on several factors:
- Experience and Track Record: Look for wealth managers with several years of experience and a proven performance history.
- Reviews: Reviews and client testimonials are what’re going to help you actually assess the wealth manager’s performance. They’ll also offer insights into the manager’s trustworthiness and professionalism.
- Credentials and Regulatory Compliance: Ensure that the wealth manager holds the necessary certifications.
- Range of Services: Not all firms take a holistic stance on wealth management. A good wealth manager, however, provides comprehensive solutions. Their range of services includes investment advice, tax planning, retirement planning, risk management, and estate planning.
- Fees: Fee structure can also differ from company to company. Some managers only charge fixed management fees, whereas some have performance-linked fees. Choose a structure that fits your needs and ensure there are no hidden expenses involved.
- Transparency: A good wealth manager is transparent about their investment strategy, costs, and potential conflicts of interest.
- Communication: Your first meeting with a wealth manager can tell you a lot. Notice how clearly they explain financial concepts and whether they listen to your concerns. Trust is essential in this relationship, and good communication is key to building that trust.
Conclusion
Wealth managers help you grow and preserve your wealth. Growth mainly comes from investments, while preservation relies on other strategies. Tax planning helps you save money, while insurance protects you from unexpected setbacks. With estate planning, your wealth is smoothly transferred to your heirs. Essentially, wealth management is a comprehensive approach that ties all these elements together. If you want professional help managing your finances, strongly consider meeting a wealth manager. They assess your goals, risk tolerance, and financial situation to create a personalised wealth plan designed to help you achieve your long-term goals.
