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The Indian economy is undergoing a transformation, and so are the financial needs of its people. With rising incomes, changing investment behaviours, and the lack of expertise and time on the part of individual investors, the demand for professional wealth management companies is surging.
As per a Deloitte India report, the demand for wealth management as a service will almost double in five years. The assets under management (AUM) will reach $2.3 trillion by FY29 from the current $1.1 trillion in FY24 – a CAGR of 15%.
But what is wealth management, and how can a wealth manager help you? Let us find out.
What is Wealth Management?
Let us first get a clear understanding of what wealth management means.
Wealth management is a niche professional advisory service that devises personalised strategy for a client using various financial products and services. In some cases, depending on the client’s complex needs, use of all specialised financial services like taxation, estate planning, accounting, philanthropy management, risk management, retirement planning, will and trust services, etc, may be done.
A good wealth management company acts as a one-stop-shop for all the needs of busy, affluent individuals or families. The aim is to optimise growth from the investment portfolio and maximise the family’s overall financial well-being. This personalised approach is central to modern wealth management planning, where financial strategies are closely aligned with client lifestyles.
Additionally, some firms offer a digital-first approach via a wealth management app or wealth management platform that allows real-time tracking and management of assets.
Need for Wealth Management
Personal wealth in the economy is increasing. Knight Frank’s Wealth Report 2024 predicts that India might witness a 50.1% increase in ultra-high-net-worth individuals/UHNWIs by 2027. Such rising wealth will create more demand for wealth management.
However, financial guidance is not just for rich people. Most people, regardless of their income, have diverse financial and personal goals. This growing need has also led to the rise of private wealth management and wealth planners who specialise in customised solutions.
There are numerous investment options available to achieve these goals. But, figuring out the right investment and getting a solid plan in place shows why everyone needs good wealth advisory.
In today’s digital age, many firms allow clients to access their plan and progress via wealth management apps and dashboards for easy monitoring.
Standard Features of a Wealth Management Company
Some of the standard features that can be seen across wealth management firms are as follows:
SEBI & other Regulations
These firms are governed by various regulations depending on the nature of the service rendered. It is common to find these firms getting licensed with SEBI as Registered Investment Advisor, Portfolio Management Service (PMS), Alternative Investment Fund (AIF), etc. These licenses help generate confidence in investors that the firm complies with the applicable legal and ethical requirements.
Such regulated entities form the backbone of top wealth management companies/top wealth management firms in India.
Client First
These firms act as a “fiduciary” to you. This means a relationship of trust whereby the firm keeps your interests first. The firm can only recommend investment products after a detailed analysis of your risk profile and financial goals. This is in welcome contrast to the general trend of financial companies pushing only those products that generate the maximum commission.
Compensation Model
These private wealth management firms generally charge a fee for their efforts and given the fiduciary nature of the work involved. Firms typically charge an annual fee as a percentage of assets under management (AUM). SEBI mandates transparent fee disclosures, and specific caps exist for certain services (e.g., SEBI RIA and PMS guidelines).
Process Driven Teamwork
Instead of a one-man army, wealth managers are generally organised as a separate division in a bank or small independent boutique firms. These firms consist of skilled professionals who are subject matter experts in multiple areas.
These firms have well-defined internal processes for onboarding and service delivery of clients, which reflects the core components of wealth management.
What are the Roles and Responsibilities of a Wealth Manager?
The wealth managers need to wear many hats depending on client requirements and require both hard and soft skills. The hard skills represent knowledge of various investment and wealth management products, taxation, and regulations. The soft skills represent the wealth manager’s overall EQ (emotional quotient) like communication, presentation, and counseling skills.
Some of the prominent roles and responsibilities of a wealth manager include the following:
- Devise solutions and provide support on various investment, tax, and estate planning matters
- Provide a quick solution to your concerns and manage the overall relationship with you
- Keep you updated on the new and upcoming financial changes and government regulations (for, e.g., Union Budget) and its impact on your investment portfolio
- Provide counseling support in challenging market situations so that you don’t panic but rather stick to your investment plan
- Use various financial tools and software to prepare a customised financial plan. Explain the plan calculations to you in a simple way and get your implementation signoff
- Coordinate with the back office and other experts in the team regarding the implementation of plan recommendations.
- Regularly track the performance of your financial plan and hold periodic meetings with you to check if any changes need to be made
- Update you of new investment opportunities along with a suitability and risk analysis
What Should You Consider While Hiring a Wealth Manager?
- Qualifications, expertise, and licenses: This is the most important. Check whether the wealth manager is sufficiently licensed for the activities that it performs. The licenses should be active and not expired. Check the profile of the team members of the firm for their qualifications and experience. This also includes understanding what is a wealth manager in terms of role and certifications.
- Transparency: A good wealth management firm’s website must clearly state matters like investment philosophy, fee model, past performance, licenses, Code of Ethics, and other regulatory disclosures. Checking this will give you a fair idea of the level of transparency maintained by the firm.
- Investment philosophy: A clear-cut and objective investment philosophy forms the bedrock of any good wealth management process. It shows that the firm follows a process-driven approach to investing. Review the investment philosophy to see how much it aligns with your preferences. Don’t hesitate to ask questions if anything is not clear.
- Range of services: A good wealth advisory services provider must offer comprehensive support, including banking and wealth management, insurance, tax, and estate planning.
Ask whether these services are available in-house or provided externally. Prefer the former option to prevent dilution in service quality and the possibility of delay. In the case of external providers, check for their credentials and capability in their respective fields.
- Quality of service: One of the often-overlooked benefits of wealth management is the peace of mind it offers. Speaking to clients is a great way to assess service excellence.
Conclusion
Financial planning and wealth management is an industry whose time has come. Increasingly, young and affluent investors are warming up to the idea of seeking professional and holistic advice to sort out the many pieces of their financial puzzle. Your focus as an investor should be finding best wealth management firms who understands your unique needs and puts your interests first.
A good wealth manager by your side not only helps you make your money work harder but also reduces your money worries and helps you get a peaceful night’s sleep.
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