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Tata Capital > Blog > Wealth Services > Why having a wealth manager makes sense for everyone?

Wealth Services

Why having a wealth manager makes sense for everyone?

Why having a wealth manager makes sense for everyone?

Wealth management is an investment advisory service that provides financial services to its clients. Wealth management entails a comprehensive approach to addressing the complex needs and expectations of clients.

At the heart of this process is the wealth manager who utilizes a diverse range of financial products and services to help achieve the client’s goals. Before we delve into the services offered by a wealth manager and why they are important, it is important to understand who a wealth manager is.

Who is a wealth manager?

A wealth manager is a specialized finance professional who provides comprehensive services including investment management, estate planning, tax strategy and retirement planning. The expertise of the wealth manager or wealth management firm is not limited to one or two specific areas. Instead, the wealth manager provides an exhaustive and holistic solution.

  • A wealth manager is qualified in their expertise and may have degrees such as Certified Financial Planner, Chartered Financial Analyst, and Chartered Wealth Manager (by AAFM India), among others.
  • They typically begin with an internship or a junior position in private banking or in distribution set up at reputable financial firms.
  • They gain hands-on experience in client requirements and financial products.
  • With experience, they gain a deep understanding of the financial markets, regulations, planning, and strategy. 
  • Successful wealth managers have a strong track record of meeting client and portfolio targets.
  • A wealth manager must have strong communication and interpersonal skills to enhance the client’s service experience.

What do wealth managers do?

The service suite of a wealth manager is expansive and detail-oriented. Their expertise and involvement in managing wealth are significantly more extensive than those of an off-the-shelf financial advisor. Here are some of the key services that you can expect from a wealth manager–

  • Detailed planning and development – A wealth manager gains an understanding of your financial goals, long-term objectives, assets, liabilities, income, and expenses. They also gather data on your risk tolerance and financial priorities. Based on this understanding, they design holistic strategies that address your typical financial goals, including retirement planning, estate planning, tax management, portfolio management, and debt management. The wealth manager, subsequently, monitors these strategies, factors in changes over time, and makes necessary adjustments.
  • Investment portfolio diversification – Strengthened by the knowledge gained from the client on risk appetite and financial objectives, a wealth manager designs the investment portfolio. They carry out asset allocation across stocks, bonds, mutual funds, real estate and alternative investments, balancing the client’s risk appetite and goals. They then track the progress of these investments and realign the portfolio if any optimization is needed or possible.
  • Risk and insurance planning – The wealth manager identifies the risks faced by the client, such as property loss, occupational hazards, and fatalities, and plans a protective strategy. They review the efficacy and suitability of insurance products and recommend the same to their clients. Similarly, they assess the legal risks associated with the client and engage counsel to address them.
  • Tax optimization – A wealth manager devises various tax-effective strategies to reduce the client’s tax liability. They ensure that the client complies with the country’s tax regulations. They optimize the client’s portfolio for taxes by using tax-friendly and tax-free investments and optimizing capital gains and losses through techniques like tax-loss harvesting.
  • Estate planning – Every client wants their assets to remain protected after their lifetime and wishes to pass them on to the rightful heirs. A wealth manager assists clients in creating wills and trusts. They design the gifting strategies and finalize the succession plan. Estate planning ensures smooth wealth transfer and legacy protection.
  • Central coordination – A wealth manager acts as the central coordinator of the client in collaboration with other subject matter experts. They identify the need for a chartered accountant, a legal expert, an insurance expert, or other specialists, depending on the client’s requirements.

Apart from these services, wealth managers mentor clients on all financial matters, monitor and analyze portfolio performance, keep client profiles up to date, and maintain regular communication channels with clients.  

Why does everyone need a wealth manager?

Anyone who has wealth would need some, if not all, of the services provided by a wealth manager. We have gone through these services already. Let us now find out how availing these services helps us –

  • Simplify finances – The finances of a wealthy individual, particularly those of HNIs and UHNIs, can be more complex compared to those of a salaried person. Wealth managers simplify these complexities through their expertise, experience and a coherent approach.
  • Proactive management – A wealth manager takes stock of your finances, visualize future financial scenarios and prepares strategies and plans. This prepares your finances for the uncertainties that the future holds.
  • One-stop shop – Through your wealth manager, you can get access to various expertise and specialties. Many wealth management firms even collaborate with or retain different experts. For instance, you can count on your wealth manager to connect you with an expert in the philanthropic domain to help you achieve your charitable aspirations successfully.
  • Peace of mind – Clients hire wealth managers to outsource all the worries and effort related to finances. Having a wealth manager ensures that you are on track and aligned with your financial goals, without the need to micro-manage everything.  

Can anyone have a wealth manager?

It is a common notion that the ultra-rich hire wealth managers. This is generally true, but not necessarily because of affordability. HNIs, UHNIs, and professionals with rising incomes, such as doctors, lawyers, startup founders, or CEOs, would typically hire a wealth manager. This is because wealth management services are a necessity for high-income individuals due to the complexities related to estate planning, taxes, investments, and other financial matters.  

Nowadays, digital wealth management platforms and bank relationship managers also offer services that mimic the wealth management suite. Thus, even a common person can gain access to wealth management services, such as portfolio tracking, goal-based investing, and other wealth-related services.

Final thoughts

Wealth managers offer strategic direction and proactive guidance to their clients in a way that standalone financial advisors cannot. Therefore, everyone should seek access to these services, either through digital platforms, wealth management firms or even as an optional banking service.

Smart debt management is a key component of wealth management, and Tata Capital can be a suitable choice in this regard, offering a wide range of loan products and attractive interest rates.

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FAQs

Is a wealth manager only for people with high net worth?

Originally, yes. But many firms now cater to professionals with an investible asset of, say, even Rs. 20 lakhs. SEBI-Registered Investment Advisors (RIAs), robo-advisors and fintech apps provide a lighter version of wealth management services to people, even though they are not technically HNIs.

How is a wealth manager paid?

SEBI has defined the fees charged by investment advisors in both fixed fee and percentage modes.    

Can’t I just manage my money using online tools?

Yes. Online tools and DIY investing are gaining popularity in India, largely due to the wealth management features they offer. You can assess and plan investment options, use goal calculators, apply tax-loss investing, and various other strategies with these tools and platforms.
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