Wikipedia of Finance - Wealth Management and Private Wealth Management Definition, Types, Examples

Wealth Management and Private Wealth Management – Definition, Types, Examples


Wealth Management Definition:

A professional service provided by wealth managers which includes investment planning, accounting, tax planning, estate planning or retirement planning, portfolio and financial services management provided to business owners or a corporate for one set fee is called wealth management.  When this professional services are provided at international level to businesses or an organization, such wealth management services are termed as global wealth management.

Wealth Management Example:

Let’s take an example of wealth management to understand, for instance – professional who are daily dealing with various investment options have much better knowledge of investment, market strategies or portfolio management than any other.  They offer best wealth management options to their clients and in return they charge for their wealth management services.

Types of Wealth Management Products and Services:

Below are few important from the list of wealth management products and services offered by wealth management professionals are:

  • Structured Investment Products.
  • Private Banking and Services.
  • Traditional Investment Products (Like: Mutual Funds, Equity, Banking Accounts, etc.).
  • Estate / Retirement / Insurance Planning.
  • Private Wealth Management / Personal Wealth Management.

Private Wealth Management Definition & Example:

Financial planning, portfolio management and other aggregated financial services entailed within investment advisory practices for private individuals is known as private wealth management. As the name term itself clarifies the definition, private wealth management doesn’t account for corporations, trusts, groups or other types of clients. Private wealth management is also termed as personal wealth management as well.

Imagine you being a private client who is located in India. If we follow your perspective or an average private client’s, the term private wealth management will be defined as the practice of resolving or increasing your financial situation and achieving your short-term, medium-term and long-term financial goals respectively. Also, it is the practice of a full assortment of financial products and services to a well-heeled client as a financial consultant so that the clients can attain specific financial goals.

Personal Financial Planning:

One of the popular private wealth management services includes personal finance financial planning. You can understand personal financial planning as a complete and systematic process which entails finance managers, his team who assess the client’s portfolio or his financial status, then they come up with a financial plan that is solely based on the desired goals of the client, the potential of finance planner and the assessment of the client’s net worth.

The basic idea of financial planning is to lucidly allocate the revenue to cover various expenses in life, for every individual has different goals and plans. Some might want a financial plan to pay their rent, other bills, manage school or college fee for children, and for other utilities. Not only does it help pay your bills but a robust financial plan will allow you to save some part of your income for short-term and long-term emergency. In order to accomplish these goals it is important for an individual to follow a series of specific steps or algorithms to organize the finances by curtailing his expenditure and optimizing savings in the future. A financial plan should not be confused with an investment plan, except for some rare cases.

Wealth Management Assessment:

To accomplish a successful private wealth management, financial assessment becomes ubiquitous and it is essential to attain the desired goals. It is the process of compiling basic accounts of financial statements like cash flow, balance sheets and income statements. A personal balance sheet entails assets like, car, stocks, clothes, house, and bank account along with personal liabilities such as credit card debt, bank loan and mortgage. A personal income statement lists personal income and expenses. Such financial assessment is used to evaluate an individual’s contribution towards your income versus expenses. A person earns INR 30,000 and he plans his personal budget in an order where he can contribute 20 per cent into savings and 80 per cent into expenses, this is a basic example of financial assessment. Only after do you have the assessment sheet of your private equities, will you be able to set the desired goals.

Goals Setting and Accomplishments:

Setting some primary financial objectives or goals is really important, because only our goals keep us moving in the right direction. Everyone has set some goals for their lives, for some of us it retiring early and building a dream house, some of us want to pay for children’s higher education while some of us want to pay our entire mortgage and be debt free. As mesmerizing as it sounds, let us not lose the touch of practicality.

The services of private wealth management services can be rendered by either larger corporate entities, independent financial advisers or multi-licensed portfolio managers. The latter on normally prioritizes the high-net-worth private clients.

Usually well off banks or brokerage houses well equipped, both financially and resourceful proffer different types of investment services and products to individuals. But in some of the cases it’s been noticed that often private individuals are either short of time, effort or enough knowledge about managing their finances successfully by allocating relevant assets resourcefully. To help these individuals and to make up for what may be lacking, wealth managers who specialize in managing the finances of private individuals are approached and they guide the clients through the services and products that will help them enhance their wealth. These services are often made in accordance to high-net-worth individuals (HNWI).

The wealth manager hired then sits down with the private individual and details himself with the current financial status of the client, his potential needs and then comes up with way that will help him attain the desired goal. Wealth manager is responsible for generating revenue through client’s investment.

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