If you are a reasonably well off individual living in India’s metros, at some stage a “relationship manager” or a “wealth manager” would have approached you with an offer to “manage” your wealth.

You may have recoiled in horror, or been pleased that somebody thinks you are now in the “wealth” category.

However, do not be too impressed by the caller. The definition of wealth has come down substantially! That is all. Portfolio Management for example is now available even for Rs. 500,000! This is a poor joke because serious fund managers would not consider this amount for fund management!

You would surely have started wondering what exactly is “wealth management”?

Well, it is the process of systematically and simultaneously building wealth and protecting it.

Thus the person who is offering the services of wealth management to you should be well versed in – financial planning, asset management, insurance, tax management, and estate planning.

Apart from this he or she should be well versed in economics, and have nice soft skills. He should be persistent enough to make sure you invest your time and money in the right direction. But not so pushy that you get put off.

Clearly, Wealth Management is as concerned with the defensive nature of protecting assets as it is with building asset value. Due to its more complex nature, it is typically not available to individuals with low asset values.

Telling a Doctor how to plan purchase of assets and what records to keep for income tax may not exactly be a wealth manager’s job, but he should appreciate that a doctor needs help on these areas also.

However, stock brokers, life insurance salesmen, mutual fund salesmen have normally got a bad press! So many Wealth Management companies are merely a re-labeled stock broker. Typically brokers have a reduced scope and talent set than a person providing Wealth Management services.

How can you tell the difference? Ask your broker/ financial advisor how they are compensated. Those who are compensated only on the basis of time spent is a far superior idea than a commission basis reward. Even the planner who is compensated by a fee for time spent plus a commission on sales is slightly suspect. This is because given Indian conditions the commission structure is far higher than the fee portion – this is bound to bring bias even to the way they talk!

Brokers don’t always have to meet a high standard of care – unless they are acting in a role that demands it. Brokers should make it clear (to a client) about the capacity under which they are operating.

Ask them to elaborate on their financial planning education and whether they offer services based on developing a comprehensive financial plan that integrates views on tax , estate, investment, insurance planning, and asset protection. Ask them will the advise be the same if you were to execute it with another person and paid them for their time spent.

Do you honestly believe an hour spent with you, and the use of a company financial plan generator will meet your needs?

God bless you, if you do

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  1. I don’t know how much of wealth management is effective & which are the companies you can trust your wealth with.

    I know a person who allocated a high 6 figure sum to one of the reputed bank/broker. The initial allocation was done so that 80-90% of capital is protected but he was horrified later when he knew that the allocation was never done & he has lost almost 40% of his capital.

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