What is Wealth Management?
Wealth comes in lots of different forms and way; its not simply a matter of having huge sums of cash in your bank account. People who have a lot of money often have complex financial arrangements in which their assets are widely spread and diverse in nature (‘assets’ is the term used for anything owned by an individual or business which has monetary value). Making those assets work most efficiently and productively takes an in-depth knowledge of both financial markets and the latest investment opportunities. This is where the Wealth Management division comes in.
It does exactly what it says – Wealth Management is about managing people’s wealth. The people in question are usually defined as high net worth individuals. ‘HNWs’ are generally defined as people who own financial assets over £1 million.
What types of clients are there? Well, they could be anyone – or rather anyone who has enough money to warrant employing a wealth manager: successful business owners, entrepreneurs, people who are rich through inheritance, perhaps even celebrities.
Given the often complex nature of a HNW individual’s assets, it is no good for a wealth manager just to advise on what to do with one lump of cash. Wealth managers provide comprehensive financial support for their clients. The advice they offer will be wide-ranging and varied. It can cover taxes and asset protection, investments to property advice. Of course they can’t be experts in everything – in many cases they’ll act as a ‘front’ for other departments in the bank, depending on the complexities of the services required.
The things they do will often touch on many aspects of their clients’ lives from business to family. Nurturing the relationship they have with their client is vital to retaining and growing their business.
Wealth Management services are offered on a discretionary or non-discretionary basis:
Clients who opt for discretionary support effectively hand over their finances to the bank to manage. Based on pre-determined criteria, the bank will make investment decisions (perhaps through its Asset Management division) on behalf of the client and assumes responsibility for protecting and growing their wealth.
‘Non-discretionary’ means that, although the client receives advice from the bank, ultimate decision-making still lies with the client.
Investment Management or Fund Manager in UK is the professional management of various securities such as company shares, corporate bonds, fixed interest securities and alternatives such as commodities. A lot of managers also trade in real assets such as property, predominately commercial property, in order to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations, charities, educational establishments etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds or exchange-traded funds).
The term asset management is often used to refer to the investment management of collective investments, while the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called “private banking”.
The provision of investment management services includes elements of financial statement analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Coming under the remit of financial services many of the world’s largest companies are at least in part investment managers and employ millions of staff.
Fund manager (or investment adviser in the United States) refers to both a firm that provides investment management services and an individual who directs fund management decisions.