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Topic - Wealth management

PROJECT ON “WEALTH MANAGEMENT” Bachelor of Management Studies Semester V (2017-18)

In partial fulfilment of the requirements for the award of degree of Bachelor of Management Studies

Submitted By VINIT ANAND SINGH Roll No: TMS 17005

Under the guidance of Asst. Prof. Naira Bhatia

S.I.C.E.S Degree College of Arts, Science & Commerce Ambernath (W) 1

Topic - Wealth management

DECLARATION

I VINIT ANAND SINGH, student of T.Y.B.M.S (Bachelor of management studies) Semester V (2016-2017) hereby declare that I have completed this project on “WEALTH MANAGEMENT”.

I further declare that the information imparted is true and fair to the best of my knowledge.

SIGNATURE

VINIT ANAND SINGH ROLL NO.-TMS 17005

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Topic - Wealth management

CERTIFICATE

This is to certify that MR. VINIT ANAND SINGH of T.Y.B.M.S., Semester-V (2016 2017) has successfully completed the project on “WEALTH MANAGEMENT” under the guidance of Asst. Prof. Naira Bhatia.

(Asst. Prof. Naira Bhatia) (Course Coordinator)

(Asst. Prof. Naira Bhatia)

(Dr. Harshal Bachhav) (I/c Principal)

(External Examiner)

(Project Guide & External Examiner)

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Topic - Wealth management

TABLE OF CONTENTS:

CHAPTER

PARTICULARS

No.

PAGE No.

3 4 5 6 7 _ _

Bibliography/Webliography

_

Questionnaires

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Topic - Wealth management

INTRODUCTION Management is what a manager does "the statement given by Louis Allen has very broad and meaningful meaning. Though we all know that 'Manage' is nothing but to forecast and plan, to organize, to command, to co-ordinate and to control. The eminent writer and management guru William Spriegal has given very valuable definition that 'Management is that function of an enterprise which concern itself with the direction and control of the various activities to attain business objectives. Management embraces all duties and functions that pertain to the initiation of an enterprise; it's financing the establishment of all major policies and the provisions under which the organization is to be run and the selection of the principal officers'. In the general view the word management is form with Manage + Men + 'T' where 'T' stands for the factor time. The term wealth management also now a days having very importance. So many Banking companies are engaged in the business of wealth management. The premier insurance industry is now booming because so many bankers are also adopting and playing safe in the business of insurance the term called is Bancassurance. Now a day’s wealth Management has very craze in the business world. In a survey it was found that India had 100,000 milliners day end of year 2006 is now grow up by 21% from a year earlier (Asia pacific wealth report)

CONCEPT OF WEALTH MANAGEMENT The term wealth management formed with two words wealth & Management. The Meaning of Management we have already seen in the steering introduction. The 5

Topic - Wealth management

meaning of wealth is – Funds, Assets, investments and cash it means the term wealth management deft with funds Asset, instrument, cash and any other item of similar nature. While defining wealth Management we have to think in planned manner. "Wealth Management is an all inclusive set of strategies that aims to grow, manage, protect and distribute assets in a much planned systematic and integrated manner. "

MIDDLE EAST & WEALTH MANAGEMENT In this globalized era Middle East countries have huge wealth management need. There are two types of wealth management institutions. They are:(1) Private Banks

(2) Family Offices, engaged in the business of wealth management in Middle East. For our information the wealth management institute (WMI), the first centre of excellence for the wealth management education in Asia was established in Singapore in the year 2003. The wealth management Institute (WMI) is providing professionals for wealth management with a nice combination of learning and practical training. The aim of WMI is to establish Singapore as the Asian hub for wealth Management. Where Pvt. Banks and Family Offices are discussing about the strategies to capture the wealth management business in the Middle East. The global institutions are looking towards the Middle East to grow their wealth management business and attracting the big business houses by their attractive service providing facilities. Tapping in to the Middle East market it is very crucial for private banks and private wealth managers, the entry and increasing market share is not very easy task for them but they are fighting. The Middle East region has become very highly competitive over the last five years. Local banks now competing with international banks.

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Topic - Wealth management

What is 'Wealth Management'?

Wealth management is a high-level professional service that combines financial and investment advice, accounting and tax services, retirement planning and legal or estate planning for one set fee. Clients work with a single wealth manager who coordinates input from financial experts and can include coordinating advice from the client's own attorney, accountants and insurance agent. Some wealth managers also provide banking services or advice on philanthropic activities.

BREAKING DOWN 'Wealth Management' Wealth management is more than just investment advice, as it can encompass all parts of a person's financial life. The idea is that rather than trying to integrate pieces of advice and various products from a series of professionals, high net worth individuals benefit from a holistic approach in which a single manager coordinates all the services needed to manage their money and plan for their own or their family's current and future needs.

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Topic - Wealth management

THE IMPORTANCE OF WEALTH MANAGEMENT When thinking about high net-worth individuals, there's a tendency to view them as people without problems, living a life of luxury. Because they've been able to amass a significant amount of wealth over time, they're set for life - or so the thinking goes. In fact, having a high degree of wealth is far from a care-free status. Owning wealth means needing to take care of it, whether through implementing tax planning, setting up an orderly estate or creating a successful investment plan. This might explain the soaring popularity of wealth management. According to a recent Deloitte report, on the back of this increased demand, wealth management is set to be one of five future "growth waves" for the Australian economy. Along with gas, agribusiness, tourism and international education, wealth management could become an industry as large as mining.

Wealth management is your key to retirement Perhaps the biggest reason for the importance of wealth management is the issue of retirement. The cost of living has been, and still is, steadily rising in Australia.

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Topic - Wealth management

At the same time, similar to other western nations, Australia's pension system is also due to come in for increased strain as the number of elderly in the country rise. Headlines in recent years have fixated on concerns about the adequacy of the age pension, with the Sydney Morning Herald reporting in June that pensioners are increasingly leaving for cheaper pastures. Under these circumstances, it's increasingly important to formulate superannuation and retirement strategies - as well as ensure your wealth is protected - in order to have as secure a retirement as possible.

It's also about your priorities Wealth management isn't simply about making financial plans for your future, however. At its most basic, wealth management is a matter of realising your priorities. If you grew a significant amount of wealth in the first place, it was likely for a particular reason, whether to have financial security and stability, to start some kind of enterprise or provide for your children. Wealth management - through the right investment advice, assistance with taxes or even counsel on what to do with debts - is what allows your vision to become reality.

The concept of a wealth management strategy is simple It is a customized plan that you can follow to achieve your financial goals and dreams. If you want a secure financial future, it is imperative that you take the time to develop a financial roadmap. Your strategy should take into account every aspect of your wealth, including your estate, financial, and investment plans. Wealth Management For many people, wealth management has been conflated with investment planning. However, while investment planning is a significant part of a wealth management strategy, it is not the only part. An effective wealth management system encompasses all aspects of a person’s wealth, from retail banking services, an investment portfolio, and estate planning, to legal advice, tax advice, and regular financial planning.

Investment Advisors vs. Wealth Managers

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Topic - Wealth management

While investment advisors and wealth managers carry out some of the same functions, it is important to note that there is a difference between the two roles. An investment advisor usually has a particular purpose: planning and/or carrying out investments. A wealth manager, on the other hand, offers a wider array of services to a client, such as insurance reviews, real estate, estate planning, and tax and legal counsel. Wealth managers take the whole picture into account, rather than just a small part of the client’s total financial health.

Financial Plan The ultimate goal of wealth management is to grow and nourish long-term capital. While wealth managers may not have expertise in every aspect of your estate, they often enlist help from other trusted advisors in a particular field. So, your wealth manager may have lawyers or accountants who they work with that help them understand what the best option is for you and your assets. Some wealth managers even have these experts in-house. The most important thing to remember about wealth management is that it is a holistic process. It's a strategy that takes into account every single part of your financial assets. Working with a good wealth manager will help ensure you have a bright, stable financial future ahead of you. While the use of a wealth manager is based on the theory that he can provide services in any aspect of the financial field, some choose to specialize in particular areas. This may be based on the expertise of the wealth manager in question or the primary focus of the business within which the wealth manager operates.

Wealth Management Example For example, those in the direct employ of a firm known for investments may have more knowledge in area of market strategy, while those working in the employ of a large bank may focus on areas such as the management of trusts and available credit options, overall estate planning or insurance options. The position is considered consultative in

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Topic - Wealth management

nature as the primary focus is providing needed guidance to those using the wealth management service.

Wealth Management Business Structures Wealth managers may work as part of a small-scale business or as part of a larger firm, most often one directly associated with the financial arena. Depending on the business, wealth managers may function under different titles including financial consultant or financial advisor. A client may receive services from a single designated wealth manager or may have access to members of a specified wealth management team.

Strategies of a Wealth Manager 11

Topic - Wealth management

The wealth manager starts by developing a plan that will maintain and increase the client's wealth based on that individual's financial situation, goals and comfort level with risk. After the original plan is developed, the manager meets regularly with clients to update goals, review and rebalance the financial portfolio, and investigate whether additional services are needed and with the goal of remaining in the client’s service throughout his lifetime. Wealth management as an investment-advisory discipline which incorporates financial planning, investment portfolio management and a number of aggregated financial services. High-net-worth individuals (HNWIs), small-business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate retail banking, estate planning, legal resources, tax professionals and investment management. Wealth managers can have backgrounds as independent Chartered Financial Consultants, Certified Financial Planners or Chartered Financial Analysts (in the United States), Chartered Strategic Wealth Professionals (in Canada), Chartered Financial Planners (in the UK), or any credentialed (such as MBA) professional money managers who work to enhance the income, growth and tax-favored treatment of long-term investors.

All about wealth management in India Increasingly more numbers of Indians are joining the millionaires club and wealth management in India is gaining popularity. The economic boom and subsequent increase in income levels are acting as the impetus in driving India forward.

The huge chunks of money that these millionaires possess need to be managed well and this is why wealth management in India is becoming one of the most sought after services. Wealth management is an investment advice or assistance to manage a person's finances. These services are offered to clients with two main goals - growth and safety of their existing investment.

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Topic - Wealth management

And the specific definition of wealth management according to Investopedia is "A professional service which is the combination of financial/investment advice, accounting/tax services, and legal/estate planning for one fee "

Types of Service Providers for Wealth Management in India There are majorly three types of service providers for wealth management currentlyBanks, Brokerage firms and Boutique advisory firms.

Banks have larger investment distribution model which means they concentrate on a larger investment portfolio. They cater to mid-level segment clients as well as the HNWI 's.

Brokerage firms focus on investing the customer's money majorly in shares and IPO, which are equity market products.

Boutique advisory firms provide customized financial solutions to the clients who are majorly the ultra - HNWI's and HNWI's.onj0Wealth management The 21st century in India saw a spell of entrepreneurial ventures that has created an ever-growing High Net worth Individuals or HNWI 's. India currently has the fourthhighest number of HNWIs in the Asia-Pacific region after Japan, China and Australia.

The HNWI segment is the fastest growing segments leading to the growth of the wealth management industry, which could possibly be the most sought after career choice. The wealth management industry in India is growing rapidly mainly because of two reasons - the changing regulatory environment and increasing competition. Due to the growth rate, many big names have set up their wealth management division in India in the last few years. The existing business houses are also diversifying their services and venturing into wealth management.

In the early period wealth management sufficed the fundamental requirement of

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Topic - Wealth management

insurance and mutual funds products for individuals. During that time the advisory services as a separate division did not exist and institutions did not charge for it. But gradually, with regulatory changes, the sector diversified and found new source of income in wealth management.

Various financial institutions and banks are constantly eyeing ways to entice customers towards their wealth management services. Several wealth managers today are available for customers to seek best services from.

This trend is only going to spurt with India touted to become the third largest global economy by 2030. Today, wealth management in India is still nascent and hence, largely fragmented. The organized players mainly focus on the urban segment leaving a large group of the HNWI untapped across other towns in India. The regulatory environment and tax structure changes will present a lot of opportunities for wealth managers to multiply their product offerings.

Wealth Management in India and the competition Just like every growing industry, competitive rivalry is increasing in the wealth management sector in India with existing players expanding their offerings, and the emergence of new local and global players. As of now this industry is fragmented with brokers, sub-brokers, financial advisers, insurance and tax consultants. Financial institutions, private banking divisions of popular lenders, and public sector banks provide wealth management services in India. They possess huge brand equity, influence, corporate affiliations, which can prove as a tough competitor for the existing players.

Wealth management in India is still prospering and also presents itself as a promising profession for the new age India. This could be just the beginning of the boom that this industry is yet to see.

WEALTH MANAGEMENT: INDIAN CONCERN 14

Topic - Wealth management

Some times people confuse asset management or financial management with the wealth management. But wealth management has very broad area.

Position of India in Wealth Management In the annual survey done by Cap Gemini, SA and Merrill Lynch it was found that ranks of millionaires grew 6% in the previous year, because the number of richer people grew in India & China where India is competing China. India & China posted the biggest gain in millionaires advancing by 23% & 20% respectively. When we are watching the world wide increase in number of millionaires the facts collected by Cap Gemini, S.A. and Merrill Lynch survey report. India has 23% growth in the last year. The biggest Asian economy China stands on second position with 20%, west Asia 16%, United States 4% and United Kingdom (UK) 2%.So we can understand that there is more opportunities in the wealth management business in Asia especially in India.

ICICI BANK & WEALTH MANAGEMENT In India ICICI bank and Axis-Bank are very well known banks in the field of wealth management. ICICI Bank will float subsidiary for the purpose of WM activities in Canada & other market even as ICICI has rolled out ICICI Group Global Private Clients for those with net worth of $ 1 million or more. ICICI GCPC launched their business in Dubai very recently in the month of April-08 and caught 2500 clients. They are going to add another 1000 high network clients this year. ICICI Bank is using the services of global players like Merrill Lynch, City group, and UBS for catching the clients for Wealth Management business. ICICI Bank and its subsidiaries are engaged in the development of various attractive products (services) for the clients with net worth of $ 1 million. The eyes of ICICI Group Global Pvt. Clients on the rising number of dollar millionaires at present they are 100,000 in number in few year the number will definitely increase. India's No.2 lender banker ICICI expects to sustain the 70% growth in its private wealth management business. ICICI has 150,000 customers with investible surplus of at least Rs. 10 lakhs equity, real estate and private equity is driving the private banking business in India. India has market of wealth management about $ 600 billion. 15

Topic - Wealth management

AXIS BANK & WEALTH MANAGEMENT One of India's leading private sector banker Axis bank also combined with Banque Privee Edmond de Rothschild Europe based wealth management expertise institution & is going to make new standard for the NRI's wealth management. The LCF Rothschild group has based its reputation in the area of wealth management on its big banking experience. Actually the institution is engaged in the task of providing financial advise to the Europe's leading families, Government and various corporations for the last '7' generations. The Axis Bank 5th largest bank by market capitalization in India provides payroll services to over 12000 corporates across 2.8 million salary accounts. The market capitalization of Axis Bank was 235 million in the last year 2007 is engaged in the business of wealth management, with its international presence in Dubai, Singapore Hong Kong, Shanghai and so on.

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Topic - Wealth management

SERVICES PROVIDED BY WEALTH MANAGEMENT INSTITUTIONS (1) Custodian Services:(A) Securities Safekeeping (B) Income collection from Securities (C) Settlement of Securities trades as directed (D) Payment of fund when directed (E) Timely settlement delivery (2) Trust Services:(A) Charitable Trust (B) Revocable Trust (C) Irrevocable life Insurance Trust (D) Special Need Trust (E) Institutional Trust (3) Retirement Plan Services:

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Topic - Wealth management

(A) IRA's Custodian or Trustee (B) Defined Benefit Plans (C) Defined Contribution Plans

COMPARATIVE ADVANTAGES AND DISADVANTAGES OF WEALTH MANAGEMENT TALENT IN THE SECURITIES INDUSTRY In recent years, international financial institutions have been struggling to develop the emerging wealth management business that will be a major pillar for the profit of financial institutions in the future. Wealth management originated in Europe and grew in the United States. For financial institutions, wealth management is a new type of business operation model. For clients, wealth management is a type of integrated financial service. Wealth management has become an emerging financial field perpetuated by securities companies, commercial banks, and insurance companies. A large number of commercial banks have started transitioning from capital providers to national wealth managers. Many securities traders have also jumped on the wealth management bandwagon. Wealth management covers such aspects as investment counselling, lifelong wealth management planning, and capital value retention and increase. It has become one of the three major business sectors of the global financial industry, alongside credit/lending and investment banking. It is likely to become the most important growth area. Sizable middle and wealthy classes have emerged in China. Wealth management will therefore become a major contender among domestic financial institutions. Specifically, wealth management involves providing clients with pragmatic plans, suggestions concerning

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Topic - Wealth management

relevant tactics, and action plans to help clients meet their wealth management goals in a comprehensive way. In the field of wealth management, securities traders have to face competition from banks and third-party wealth management providers, as well as other enterprises. At the core of the competition not only is there expertise, products, and brands, but also a profitability model, which is even more important. Banks have obvious conduit and customer base advantages, but fall short in terms of the ability to provide professional services. Third-party wealth management provides opportunities for matchmaking between upstream and downstream clients. Their core competitive strength lies in product development participation and selection. Securities traders do not compare favourably with banks in terms of conduit networks, but they have an edge in their ability to provide professional services. In comparison with banks and mature thirdparty wealth management, securities traders have another weakness in the wealth management competition—a limited selection of products to offer. As far as professional service goes, securities traders can provide integrated financing and investment business services. However, in their wealth management practice, most Chinese securities traders are still unable to effectively integrate internal resources in a way that enables them to provide their own characteristic, client-centric, integrated institutional/retail/investment and financing services. Often they simply confront banks and third-party wealth management organizations on the product battleground. This is equivalent to fighting with a handicap, and the result is obvious. Accordingly, due to a lack of clearly defined wealth management profitability models, the team-building effort for wealth management is a bit muddled. In investment counselling, oriented team building is hugely favoured by securities traders. In operation practice, however, securities traders still count on a team development model with marketing at the core. The dream of creating value through investment counselling services in reality suffers from a lack of profitability model guidance, product support, and the ability to provide high quality professional investment counselling services. Most securities traders are still taking baby steps on the path of wealth management transitioning and teambuilding, experimenting their way forward. Based on previous discussions about the core competitive strength of securities traders and key talents, in order to develop wealth management, securities traders need to address the three core issues discussed next. 19

Topic - Wealth management

The following are the advantages of wealth management concept. 1) Helpful in Tax Planning: The wealth management professional always shows the good path to the customers and provide the service of tax planning. How to minimize the tax and save more money?

2) Helpful in Selection of Investment Strategy: Another advantage from the customer point of view is with the help of WM Professional the customer can easily know the investment strategy and analyse risk and return.

3) Helpful in Estate Management: With the help of wealth management professional we can also manage our estate. Estate management is a task to provide objective administration of our funds tailored to aim in responsible distribution and protection of our overall estate.

4) Helpful in forward looking: We can say planning, that recognizes as our estate grows and changes occurs we require some team of professionals who help us in future planning.

5) Helpful for Indian Economy: Banks which are engaged in business of WM earning revenues from the foreign countries i.e. outsourcing for economy

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Topic - Wealth management

LIMITATIONS 1. WM Reduces The Scope Of Management: Though we all know that management has existence at all levels of life and society but the term wealth management only related with the higher level means rich people, and is not having any plans and provisions for poor and lower and middle level of society. 2. Chances of Fraud: Another demerit or limitation of the WM concept is it is not showing the actual position. The customer doesn't know about the things going on with using his wealth and there may be chances of forgery and fraud with customers. 3. Actual Picture VS Inflation: What is the actual position of market we don't know because every thing is done by some WM professionals. So we can not assume our position in the market that also results in inflation because economy is unknown about the actual state. There may be chance that the customers are in risk but they are showing the false return and vice-versa.

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Topic - Wealth management

CONCLUSIONS

After studying the overall concept of wealth management we can say that it has various aspects some are favourable and friendly for the Indian economy and some are very dangerous for the Indian economy. The customers have to beware and they have to make SWOT analysis before choosing the wealth management option. At present Indian Economy is facing a lot of trouble by increasing inflation by 11.05% and hike in fuel prices in the Indian as well as international market. As per Indian concept wealth management can not success in India. But if Indian financial institutions are engaged and choosing the WM business in foreign countries, most probably middle-east countries, it may be some relief for the downward moving Indian economy.

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Topic - Wealth management

PRIVATE WEALTH MANAGEMENT

Private wealth management is delivered to high-net-worth investors. Generally this includes advice on the use of various estate planning vehicles, business-succession or stock-option planning, and the occasional use of hedging derivatives for large blocks of stock. Traditionally, the wealthiest retail clients of investment firms demanded a greater level of service, product offering and sales personnel than that received by average clients. With an increase in the number of affluent investors in recent years, there has been an increasing demand for sophisticated financial solutions and expertise throughout the world. The CFA Institute curriculum on private-wealth management indicates that two primary factors distinguish the issues facing individual investors from those facing institutions: 1. Time horizons differ. Individuals face a finite life as compared to the theoretically/potentially infinite life of institutions. This fact requires strategies for transferring assets at the end of an individual's life. These transfers are subject to laws and regulations that vary by locality and therefore the strategies available to address this situation vary. This is commonly known as accumulation and decumulation. 2. Individuals are more likely to face a variety of taxes on investment returns that vary by locality. Portfolio investment techniques that provide individuals with after tax returns that meet their objectives must address such taxes.

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Topic - Wealth management

The term "wealth management" occurs at least as early as 1933. It came into more general use in the elite retail (or "Private Client") divisions of firms such as Goldman Sachs or Morgan Stanley (before the Dean Witter Reynolds merger of 1997), to distinguish those divisions' services from mass-market offerings, but has since spread throughout the financial-services industry. Family offices that had formerly served just one family opened their doors to other families, and the term Multi-family office was coined. Accounting firms and investment advisory boutiques created multi-family offices as well. Certain larger firms (UBS, Morgan Stanley and Merrill Lynch) have "tiered" their platforms – with separate branch systems and advisor-training programs, distinguishing "Private Wealth Management" from "Wealth Management", with the latter term denoting the same type of services but with a lower degree of customization and delivered to mass affluent clients. At Morgan Stanley, the "Private Wealth Management" retail division focuses on serving clients with greater than $20 million in investment assets while "Global Wealth Management" focuses on accounts smaller than $10 million. In the late 1980s, private banks and brokerage firms began to offer seminars and client events designed to showcase the expertise and capabilities of the sponsoring firm. Within a few years a new business model emerged – Family Office Exchange in 1990, the Institute for Private Investors in 1991, and CCC Alliance in 1995. These companies aimed to offer an online community as well as a network of peers for ultra high-networth individuals and their families. These entities have grown since the 1990s, with total IT spending (for example) by the global wealth management industry predicted to reach $35bn by 2016, including heavy investment in digital channels. Wealth management can be provided by large corporate entities, independent financial advisers or multi-licensed portfolio managers who design services to focus on high-networth clients. Large banks and large brokerage houses create segmentation marketingstrategies to sell both proprietary and non-proprietary products and services to investors designated as potential high-net-worth clients. Independent wealth-managers use their experience in estate planning, risk management, and their affiliations with tax and legal specialists, to manage the diverse holdings of high-net-worth clients. Banks and brokerage firms use advisory talent-pools to aggregate these same services.

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Topic - Wealth management

The Great Recession of the late 2000s caused investors to address concerns within their portfolios.[5] For this reason wealth managers have been advised that clients have a greater need to understand, access, and communicate with advisers about their situation.

Private Wealth Management is the management that deals with the sophisticated financial solutions and highly customized investment management. They provide the financial planning session to the people that include the advices on the use of trusts and other estate planning vehicles, the use of hedging derivatives for large blocks of stock and business succession or stock option planning. Private Wealth Management offers product and service on the demand of the wealthiest retail clients of investment firms. As the number of affluent investors had increased, so demand for sophisticated financial solutions and expertise throughout the world has been increased. ICICI bank and Axis-Bank are very reputed and well known banks in the field of wealth management In India. ICICI Bank is using the services of global players like City group, Merrill Lynch and UBS for attracting and catching the customers for their Wealth Management business. Axis bank, one of India’s leading private sector bank also combined with “Banque Privee Edmond de Rothschild”, which is the Europe based wealth management expertise institution and is going to make new standard for the NRI people wealth management. In India, the Axis Bank is the fifth largest bank by market capitalization that provides payroll services to over 12000 corporates across 2.8 million salary accounts.

Services of Private Wealth Management Institutions: 1) Retirement Plan Services: 

Defined Contribution Plans



IRA’s Custodian Or Trustee



Defined Benefit Plans

2) Custodian Services: 

Income collection from Securities



Securities Safekeeping



Settlement of Securities trades as directed 25

Topic - Wealth management 

Timely settlement delivery



Payment of fund when directed

3) Trust Services: 

Revocable Trust



Charitable Trust



Irrevocable life Insurance Trust



Institutional Trust



Special Need Trust

ADVANTAGES OF PRIVATE WEALTH MANAGEMENT ARE: 

The customer can easily know the investment strategy and analyse return and risk with the help of wealth management professional.



The Private wealth management professional provides the good service of tax planning like how customers can minimize save and the tax more money.



Customer can also manage their estate with the help of wealth management professional. Estate management provides protection of customer’s overall estate.



Those Banks which are engaged in business of wealth management professional are earning revenues from the foreign countries that mean outsourcing for economy.



Wealth management professional helps the customer in future planning for estate.

DISADVANTAGES OF PRIVATE WEALTH MANAGEMENT ARE:

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Topic - Wealth management



The big limitation of Wealth management is that they do not show their actual position to the customers. So, there may be chances of fraud and forgery with customers.



As we know that wealth management is now only related with the rich people and is not having any plans and solutions for poor, middle and lower class of people of society.



Thus wealth management reduces the scope of Management.



Mostly customers do not know the actual position of market because everything is done by some Wealth management professional. So, that results in inflation and also there may be chances that the customers are in risk but they are showing the false return etc. So, we can say that Private wealth management has various aspects in which some are favourable and some are very dangerous for the Indian economy. So, people should aware of this.

THE BASIC FUNCTIONS OF PRIVATE WEALTH MANAGEMENT COMPANIES The private wealth management industry integrates the varied and complex business of managing wealth by accounting for income needs, taxes, estate preservation and asset protection for the wealthy. Typically, private wealth management is a smaller division of a much larger investment firm or bank. The private wealth manager leverages the 27

Topic - Wealth management

expertise of the various departments inside the firm (such as the trust department) to present clients with solutions to wealth management issues. Though not required to be experts in one particular area of wealth management, private wealth managers must know enough about each area to expertly represent their clients' best interests and, where appropriate, offer advice.

CREATING INCOME

PAYING TAXES

ASSET PROTECTION

LIFE GOALS

CREATING INCOME It is the first job of private wealth managers to help create, from among various investment strategies, income or growth sufficient for the everyday needs of their clients. In addition, they must provide enough excess growth to account for inflation in order that their clients' purchasing power does not become eroded over time. In addition, hopefully the wealth manager will continue to grow the clients' assets so that they become richer. Because the wealthy often need to live solely off of their investments, today private wealth managers must use a variety of investment techniques to help clients create enough income to live off of every year. Sounds easy enough right? Not really. When you consider that someone who invests $1 million in a conservative corporate bond returning 5 percent creates a modest $50,000 a year in income, it becomes obvious that having $1 million dollars or so just isn't as big of a deal as it used to be. Sure, $50,000 is a lot of money for doing nothing, but living on champagne and caviar is out of the question. With wages in the U.S. averaging a little over $35,000 per 28

Topic - Wealth management

year as of 2004, according to the Social Security Administration, the average typical family with two income-earners can make more than someone with $1 million in the bank who lives off of his or her investments. Indeed, because of inflation, the portfolio with $1 million must return in excess of 7.5 percent just to keep up with the two-worker household that can possibly expect to get raises every year. With rates of return in the stock market sometimes as high as 20 percent or more, 7.5 percent may not seem a very high return, but when you consider that the S&P 500 in the six years since 2000 has returned less than 1 percent annually, you'll see that the job of private wealth managers in creating income for their clients isn't always easy.

PAYING TAXES Another problem wealthy clients often encounter is taxes. None of us likes paying taxes. For most of us, however, we would willingly pay additional taxes if it meant that we were making additional income. For the wealthy it isn't quite so simple. When managing large pools of assets, small differences in tax rates can translate into big changes in after-tax returns. Various types of investments used are treated and taxed differently by the IRS. For example, income derived from the interest rates of bonds is taxed differently than long-term capital gains derived from selling stock. It is the private wealth manager's job to balance assorted types of investments to create the most tax efficient combination for the client. Wealthy people are also subject to inheritance taxes. Accordingly, private wealth managers must help their clients select from a number of products or legal entities, such as trusts or insurance, to preserve their estates after their death. Though the private wealth manager does not offer legal strategy (it is against the law for anyone other than a lawyer to offer legal advice), the manager must be well versed on the various laws regarding trusts and estates. Additionally, private wealth managers often have insight and experience in managing charitable investment entities, such as endowments and foundations.

ASSET PROTECTION In today's society, people with money are sometimes targeted with lawsuits just because they happen to have money. So, an increasingly popular area of practice for private 29

Topic - Wealth management

wealth managers is called "asset protection," which helps the wealthy guard against losing money in civil lawsuits. There are several techniques used to protect assets, including U.S. trusts laws and foreign, off-shore banks. Advocates of asset protection methods contend that making their clients impervious to lawsuits doesn't just protect assets, but also prevents lawsuits from even happening. Though the above are some of the main areas in which a private wealth manager will work, they are certainly not the only ones. In general, clients will often rely on advice from their private wealth managers for a variety of decisions outside of investments. Decisions ranging from what type of car to buy to which is the best kidnap insurance policy to use are often made by clients only after first consulting their private wealth managers.

LIFE GOALS As the term wealth management has become more common, some companies have shifted towards a model which asks clients about life goals, working environments, and spending patterns as a way to increase communication. In 2014 Barron's reviewed "Wealth Management Unwrapped," a book addressed to investors without endorsing any one firm or strategy. Increasingly the industry recognized wealth management was more than an investment advisory discipline. In 2015, United Capital rebranded their wealth management services using the term "financial life management", which, according to the company, was intended to more clearly define the difference between wealth management companies and more affordable brokerage firms. The same year Merrill Lynch began a program, Merrill Lynch Clear, which asks investors to describe life goals, and includes an educational program for clients' children.

30

Topic - Wealth management

PRIVATE BANKING AND WEALTH MANAGEMENT RANKING

Rank 2013

Company

Rank 2012

31

Topic - Wealth management

Private 1

UBS

2

2

Credit Suisse

1

3

JPMorgan

4

4

HSBC

3

5

Citi

5

6

Deutsche Bank

6

7

Merrill Lynch Wealth Management

9

8

Santander

8

9

BNP Paribas

7

10

Goldman Sachs

11

banking is banking, investment and other financial services provided by banks to highnet-worth individuals (HNWIs) with high levels of income or sizable assets. The term "private" refers to customer service rendered on a more personal basis than in massmarket retail banking, usually via dedicated bank advisers. It does not refer to a private bank, which is a non-incorporated banking institution. Private banking forms a more exclusive (for the especially affluent) subset of wealth management. At least until recently, it largely consisted of banking services (deposit taking and payments), discretionary asset management, brokerage, limited tax advisory

32

Topic - Wealth management

services and some basic concierge-type services, offered by a single designated relationship manager According to Euro money’s annual Private banking and wealth management ranking 2013, which consider (amongst other factors) assets under management, net income and net new assets, global private banking assets under management grew just 10.8%YoY (compared with 16.7% ten years ago). "Best private banking services overall 2013". This table displays results of one category of the Private banking and wealth management ranking. UBS took the top spot in Euro money’s 2013 survey for "Best private banking services overall 2013.

World Wealth Report 2013 The 2013 World Wealth Report, released in June 2013, showed that despite the turbulence of the global economy, particularly in the Eurozone, both the population and wealth of global HNWIs reached significant new highs in 2012. Even though the year got off to a shaky start, HNWIs ultimately benefitted from strong market returns in spite of sluggish global GDP growth. The report was widely welcomed as good news for the private wealth management sector. The 2013 edition of the World Wealth Report also included the inaugural Cap Gemini, RBC Wealth Management and Scorpio Partnership Global HNW Insights Survey. The survey represents one of the largest and most in-depth surveys of high-net-worth individuals ever conducted, surveying more than 4,400 HNWIs across 21 major wealth markets. This survey-driven section of the report aimed to provide perspectives from the world's wealthy. Key findings included: 

In Q1, 2013, around 61% of HNWIs said they have trust and confidence in their wealth managers and firms, an increase of roughly four and three percentage points respectively, from 2012.



75.4% of HNWIs around the globe cited confidence in their ability to generate wealth over the next year. 33

Topic - Wealth management 

52.6% of HNWIs gave their advisors and support staff a strong performance rating for service.

NEED FOR WEALTH MANAGEMENT

Because you have a lot more to manage than just your wealth

34

Topic - Wealth management

 Income and Lifestyle Through an in-depth discovery process your Financial Advisor will work with you to understand and document what you want to do in this lifetime, from now until retirement and from then on. He'll then map out a course to help you seek the returns you'll need for how you intend to live and to achieve the income you'll need to do exactly what you want one year at a time.

 Borrowing We view borrowing as a strategy — an array of ways to unlock value in assets you own, without compromising the ability of those assets to continue to work for you over time. If such talk of strategy sounds like how most firms talk about investing, it should. We believe how people invest and how they borrow are inextricably linked — both sides of one balance sheet, one plan.

 Asset Protection By understanding the lifestyle you enjoy, and the one you're building toward, your Financial Advisor can see the threats against it — taxes, inflation, volatility, creditors, lawsuits, identity thieves, tragedy — and help you deal with them using everything in the arsenal of one of the world's largest financial services firms.

 Wealth Transfer Your Financial Advisor will approach your plan for wealth transfer from a wider angle than a traditional estate plan. He works with you to understand your definition of a rich life, then craft a plan to help you lead it and pass on what you see as most important to the next generation. This might mean a passion for education, or a sense of obligation for each generation to help give the one that follows a leg up in life, or both. It could mean protecting a work ethic and thirst for accomplishment, or protecting your family's bonds of affection toward one another. Whatever it is, it should start with your definition of a rich life.

35

Topic - Wealth management

 Investment Management We believe that your plan for your life is the most important part of investing. Little things...like when you plan to retire — and when you secretly hope to retire. The business you'll open when you do. How much you'd like to travel. And the aging parent who will need to move in with you in the next few years. Investing with your Financial Advisor is based on the simple yet powerful premise of wealth management: Your investments and your life are uniquely intertwined. Whether by design or by accident, they are all part of one plan. We advise that it be by design.

 Business Strategies As you lead your business toward its next stage — whatever that stage may be — you'll be pleased to learn that your Financial Advisor understands the connection between your business and your life. They are one and the same. From our standpoint, it's simply a matter of treating your business like it's the biggest investment of your life, if for no other reason than that it is.

WEALTH MANAGEMENT PROCESS

36

Topic - Wealth management

Merrill Lynch’s disciplined, four-part Wealth Management Process provides the framework to deliver a customized, high-value experience to clients, bringing all aspects of their financial life together to create, build and protect their wealth.

Step 1: Establish Objectives Work closely with clients and prospects to assess their total financial picture, helping them identify and prioritize their short- and long-term goals and gain an understanding of their risk tolerance.

Step 2: Set Strategy Assist clients in developing an asset allocation strategy that will guide them toward their goals. The strategy should take into consideration a client’s investment objectives, risk tolerance and time horizon.

Step 3: Implement Solutions Propose investments and solutions consistent with a client’s strategic asset allocation and financial goals.

Step 4: Review Progress

37

Topic - Wealth management

Meet periodically with clients to review their objectives, strategies and performance to assess their ongoing ability to achieve their financial goals. The financial advisors adopt a comprehensive approach of providing an array of financial services to their clients. Through their Wealth Management Consulting process, they coordinate investment planning, financial planning and estate planning services by addressing four primary areas: 

Creating and Growing Wealth



Protecting and Preserving Wealth



Planning for the distribution of wealth during life in the most Tax advantaged way



Planning for the distribution of wealth at death in the most tax Advantaged way

The Wealth Management Consulting approach can be split into two primary components – investment planning process and financial planning process. Once appropriate investments have been selected, the focus turns to addressing the financial planning side of the equation. After the investment plan has been designed and implemented, the financial advisors remain your long-term partner by providing ongoing monitoring of your investment portfolio and periodic assessments of the plan to assure that it continues to be appropriate moving forward. 38

Topic - Wealth management

This unique process allows them to provide an unparalleled level of service for their clients. The end result is a complete, customized plan that is designed to meet your longterm financial goals.

Wealth Management Strategies In today’s society, it is not unusual to hear of younger generations destroying inherited wealth that took several generations to build. With the variety of investments available for investors today, however, is it really that difficult to preserve wealth? There are currently over 5,500 offshore funds to choose from. In fact, the choices available to international investors are virtually limitless. The difficult question is what investments are the right mix for the investor - be it mutual funds, stocks, bonds, derivatives, real estate or some other investment.

Wealth creation strategy If the investment objective of an individual is to create wealth, the portfolio mix should be more aggressive in nature. This first generation strategy would be similar to that followed by investors under the age of 40 who are in their most productive years. Typically, the strategy would involve taking on more risk for an equally higher return. A sample portfolio might resemble the following: 15% Large Cap Equity 35% Small Cap Equity 40% International Equity 10% International Bonds Annualized returns for this group normally range from 12% to infinity. A word of caution though, only go for the very high returns if you can stomach the sometimes wide ups and downs of the investment. At this stage in the investment process, it is important to get professional investment advice. With the strategies of a good asset, investment or money manager, the investor’s

39

Topic - Wealth management

dollars will start to work early during the savings period. The time-tested tool called “word of mouth” still seems to be “King of the hill” when trying to find a good investment manager. However, as we approach a new millennium, look for technology to play an increasing role in assisting investors with this selection. The Internet is already giving magazines and trade newspapers a run for their money when it comes to highlighting the top money managers. Investors should examine the five and ten year history of the investment manager and check for things like investment performance to determine whether the assets under management are rising.

Wealth transfer strategy Upon the creation of wealth, it is often necessary to develop a strategy to transfer that wealth to the next generation. In an offshore context, this can be facilitated with a simple International Business Company (IBC). It is, however, recommended that the IBC have an attached trust, to ease the transfer of the IBC assets to the second generation. At the wealth transfer stage, the investment strategy would resemble that of an investor in the 40-55 year age group. What does this mean? Basically, the strategy requires that investments concentrate on reducing risk relative to that undertaken to create the wealth, while still seeking an annualized return between 10% and 15%; in short, a balanced or conservative growth portfolio. This type of portfolio might be distributed as follows: 15% Large Cap Equity 15% Small Cap Equity 20% International Equity 20% Bonds 15% International Bonds 15% Money Markets Mutual funds are a good choice at this stage. The advantages are clear: professional asset management and diversification. The diversification of risk may focus on such areas as currency, investment sectors, investment products and region or country. There are many 40

Topic - Wealth management

offshore mutual funds in the balanced and growth categories that reduce the risk of a wealth creation strategy, while still offering stable returns. To further manage risk, most investment professionals will advise their clients to keep at least 30% of their investments in a hedge fund. It is also important for second and third generation investors to keep in mind the hard work and dedication sacrificed in order to build the wealth. This practical check of constant reflection may go a long way to ensuring an awareness of the importance of investment decisions.

Wealth preservation strategy It is the preservation of wealth in the third generation that can sometimes create the greatest challenge. Preserving wealth can be difficult for the simple reason that those making the decisions in this era did not have to make the sacrifices necessary to create the wealth. For many, the money was always there and, as far as they are concerned, it will always be there. Unfortunately, this is not always true. It is crucial that all investments at this stage have minimal risk, seeking a return of between 814%. The investments at this stage should be similar to the investments of an individual in the 55+ age group. This would favour an investment policy geared towards income generation, while making a return well above the inflation rate. A model portfolio might have the following distribution: 20% Large Cap Equity 10% International Equity 25% Bonds 25% International Bonds 20% Money Markets

Conclusion

41

Topic - Wealth management

A tip for the wise: Focus on mutual funds in the second and third generations to further diversify risk and asset allocation. Remember as well to include a hedge fund that typically performs very well when traditional stocks take a beating. In addition, the costs of hiring a professional asset manager via a mutual fund can be much less than if you tried to do the same thing as an individual investor. It all goes back to the benefits of “economies of scale”. These strategies will ensure that the cycle of create, transfer, and loss will be converted into a positive cycle of create, transfer and preserve.

WEALTH TRENDS IN INDIA

42

Topic - Wealth management

According to the Barclays wealth report regarding the Global wealth trends 2007-2017, the most important development over the next decade would be the rapid escalation in the household wealth in the key emerging markets of China, India, Russia and Brazil. In 2007 only China makes to the top ten wealthiest countries in the world in their household wealth index. By contrast, in 2017, India will have moved to 8th position and Russia and Brazil will claim 11th and 12th positions.

In less than two decades, India has been transformed from a slow-growing agrarian country into one of the world’s most dynamic economies.

Gross Domestic Product (GDP) has grown at an average of more than 8 per cent annually over the past three years and by 8.7 per cent in the most recent fiscal year, making India the secondfastest-growing major economy in the world. This economic boom has led to an unprecedented level of wealth creation.

India also has one of the fastest-growing affluent markets in the world. Although the country starts from a very low base, our Household Wealth Index suggests that there will be 411,000 households with wealth in excess of US$1 million in the country by 2017. The numbers of mass affluent, with wealth over US$500,000, is expected to rise from a negligible figure in 2007 to 1.9 million by 2017.

In recent years, the Indian stock market, which has seen a five-year bull run, has generated significant wealth. The Bombay Sensex Index has risen six fold over the past five years, and climbed by 47 per cent in 2007. There has been a run of IPOs on the back of this: 237 over the past three years, according to figures from Ernst & Young. Some 25 per cent of Indian billionaires have made their fortunes through IPOs, according to Business Standard, an Indian newspaper. Indian industrial families have often been beneficiaries of these IPOs. “Indian industrial families are unusually global in outlook,” says Mr Aquiline, head of international Private Banking at Barclays Wealth. “It is not unusual to see family enterprises spread across the world with family members in Kenya, Canada, the UK and so on. They draw great strength

43

Topic - Wealth management

from their ability to bring together and share ideas and expertise, and to benefit from collective knowledge,” he says. Self-made entrepreneurs have also benefited from these IPOs, with Indian entrepreneurship on the rise. “A wave of successful, high-growth businesses grew up around the software industry,” says Professor K. Ramachandran of the Indian School of Business. “But this entrepreneurial spirit has not been limited to the software industry. People are generally more confident and optimistic about the possibilities of building their own businesses. We are also seeing a trend where members of industrial families are setting up new businesses, often diversified. These businesses start with favourable access to capital, social and support networks.”

COUNTRY OUTLOOK - INDIA

44

Topic - Wealth management

2007

2017

Ranking in Household Wealth Index

14

8

Total net wealth as a percentage of GDP

224 per cent

264 per cent

Number of high net worth households with overall wealth Negligible

411,000

in excess of US $ 1 million Number of high net worth households with overall wealth Negligible

1.9 million

in excess of US $ 500,000 Number of high net worth households with overall wealth 2.1 million

29 million

in excess of US $ 100,000 Percentage of households with overall wealth in excess of Negligible

0.2 per cent

US $ 1 million (ranking) Wealth held by high net worth households with wealth in Negligible

US $ 1.7 trillion

excess of US $ 1 million Average net worth per household

US $ 12000

US $ 57000

As in many emerging markets, the wealthy in India have historically kept much of their wealth in tangible goods. Recent research by McKinsey reveals that Indian households hold more than half of their savings in physical assets like land, houses, cattle and gold. The latter has always had pride of place among Indians, who are the world’s largest consumers of gold. Recent estimates suggest that the population owns US$200 billion in gold, equal to nearly half of the country’s bank deposits.

More recently, affluent Indians, in keeping with the preference for tangible investments, have been investing in the Indian property market. Indian real estate has generated stellar returns on the back of low interest rates, strong demand and a huge influx of investment from sovereign wealth funds and Middle East investment groups, among others. Our research shows that property currently accounts for around 43 per cent of overall household wealth in India. 45

Topic - Wealth management

“There has been a widespread investment in Indian real estate by all sectors of the affluent community,” says Professor Ramachandran. “You would be unlikely to come across a wealthy Indian today who does not have a strong presence in real estate.”

India’s financial markets have expanded and deepened in recent years, according to research by the McKinsey Global Institute. The country’s financial assets stood at US$1.8 trillion in 2006, more than double its GDP – a higher ratio than in Latin America, Eastern Europe or Russia. Compared with other emerging markets, there is a very strong allocation to the equity markets among retail investors in India. Our research shows that around 69 per cent of household financial assets are allocated to equities, compared with 25 per cent to cash. The proportion allocated to equities has increased gradually in recent years, from 60 per cent in 2004 to its present level of 69 per cent.

Although Indian financial markets are maturing, many affluent Indians have yet to take on board more conventional ideas of risk and diversification. Catherine Tillotson, Head of Research at Scorpio Partnership, points out that many affluent Indians, who see themselves as low risk investors, often have concentrated risk patterns due to their heavy exposure to local equity markets. “With stock markets historically achieving 40 per cent rates of return, it has been hard for investors to really consider diversifying by looking at other markets,” she says. “Perceptions of risk are very different when you have been used to achieving 40 to 50 per cent growth rates every year.”

Longer term, India’s economic prospects look rosy, although there remain obstacles to growth, including poor infrastructure, trade barriers and a shortage of skilled labour. India’s increasing integration into the global economy, favourable demographics and Improving levels of productivity augur well for the continuing rapid growth of the economy.

46

Topic - Wealth management

SCENARIO OF WEALTH MANAGEMENT SERVICES IN INDIA

Opportunities to increase revenue are scarce in the current economic environment, leading many financial institutions to contemplate forays into wealth management as a way to generate new top-line growth. Some firms already have an affluent customer base that they assume can 47

Topic - Wealth management

be easily converted to a wealth management offering, while others recognize that they’ll have to attract new clients to their institutions. Whether firms choose to set their sights on traditional or new customer segments, creating a robust wealth management offering isn’t a simple matter. Successful firms will carefully analyse their target customer segments, realistically assess their own strengths and weaknesses, and monitor and respond to actions of their competitors. Firms must also consider how technology can lower the cost to serve previously unprofitable segments.

The recent market downturn notwithstanding, a substantial amount of old and new wealth, needs managing. Factors like increased volatility and uncertainty, the growing number and complexity of financial products available, and increased personal responsibility for retirement planning have made many previously confident investors realize that they do, in fact, need advice. This demand, along with attractive industry returns, has many firms considering entering the wealth management space. However, a history of impressive returns in the wealth management market does not mean that every firm can play in it profitably. Entry into the wealth management arena holds no guarantee of high returns. If wealth management firms have traditionally targeted only the wealthiest customer segments, it is because only the wealthy can afford the high level of service traditionally provided. High net worth (HNW) clients demand a superior level of customer service and expect their advisors to have specific and extensive expertise; experienced advisors, in turn, expect their compensation to reflect their abilities. For firms looking to tap the existing wealth management client base, this level of service creates customer brand loyalty that can be difficult for even the most competitive firms to surmount. If price were no object, everyone would welcome a financial advisor. In reality, however, the cost to provide comprehensive financial planning and the expected level of customer service that accompanies it is high. Firms must balance the customer value proposition with profitability, delivering the right offering to the right client segment at the right price. Technology helps in two ways: it enables the advisor to be more efficient and serve more clients, and it makes self-service more plausible, offering firms an opportunity to expand the wealth management market by reducing the cost of providing quality advice and service. Before embarking on an ambitious and expensive wealth management effort, firms should consider the needs of the customer segment they are trying to target. Designing an offering that

48

Topic - Wealth management

matches the competencies that attractive segments value to the firm’s capabilities is the key to successful wealth management.

Beyond products and services: Five competencies, five chances to differentiate The following five competencies address customer needs that enable firms to create sustainable competitive advantage in attractive customer segments.

Advisory relationship The core of any successful wealth management offering is the relationship developed between the advisor and the client. Successful advisors develop a relationship with clients by demonstrating that the clients’ interests are the advisor’s paramount concern. In the context of an advisory relationship, the wealth management firm can work with the client to develop, implement and monitor a comprehensive wealth management strategy.

Integrated information Very few clients maintain all of their accounts with a single provider; an integrated view of their overall financial picture is critical if clients are to be able to make informed decisions. Advisors, too, should be able to access and analyse customer data efficiently. When information is automatically integrated across accounts and across institutions, advisors can concentrate on helping customers make fact-based and insightful wealth management decisions, rather than focusing on more mundane tasks like assembling statements from multiple sources.

Multichannel access Customers want the ability to access their account information when they want, how they want and where they want. The combination of integrated information and multichannel access empowers clients by enabling them to access constantly updated, accurate information, whether in person, over the telephone or online. 49

Topic - Wealth management

Perception To win new customers and retain existing ones, wealth management firms must be perceived as competent, dependable and empathetic. Clients must also perceive that they are paying a justified price for the value that they are receiving. Client opinion is formed through a combination of personal experience, word of mouth and marketing. To compete effectively, the firm must have a brand that is firmly associated with the qualities demanded of a wealth management institution.

Personal touch A major component of successful wealth management offerings is human touch. Clients respond to charismatic guidance and a high level of attention; they feel valued when their queries are addressed promptly and personally. Firms that go above and beyond expected levels of service will reap substantial rewards. The key consideration as firms extend wealth management offerings to customer segments with fewer assets is balancing the cost to serve with the revenue opportunities associated with a particular client. The challenges all institutions will face in developing viable wealth management offerings can be grouped into the areas of customer strategy, operational effectiveness, organizational design and technology strategy. While retail banks will face some of the same core challenges as other players, the following challenges are particularly pertinent to banks:

CHALLENGES FOR RETAIL BANKS DEVELOPING WEALTH MANAGEMENT OFFERINGS.

BUSINESS AND CUSTOMER STRATEGY

50

Topic - Wealth management



Identifying and migrating appropriate customers from banking services to more lucrative wealth management services



Overcoming negative image in advisory capabilities and ability to provide best-of-breed investment products



Assessing the viability of providing a wealth management offering to the mass affluent

ORGANIZATIONAL DESIGN 

Breaking out of silos to transition from a product-centric to a customer centric organization



Integrating different components of offering to provide a single point of contact for clients



Creating an environment that is focused on customer service

OPERATIONAL EFFECTIVENESS 

Building or partnering to offer more complete asset management, retirement and estate planning and protection capabilities



Leveraging physical footprint



Ensuring more rigorous adoption of “know your customer rules”

TECHNOLOGY STRATEGY 

Improving customer relationship management (CRM) implementation to enable the identification of potential wealth-management clients and provide an integrated view of customer information across all product groups



Using technology as a platform for serving the mass affluent



Improving information and data exchange to share information across silos



Integrating legacy and new systems

THE TRADITIONAL WEALTH MANAGEMENT PROVIDER

The capabilities of private banks and trust companies and independent advisors match up well with the needs of the traditional wealth-management client base. These providers are

51

Topic - Wealth management

characterized by strong personal touch and perception competencies, complemented by robust advisory and retirement and estate planning skills. To remain competitive, these firms should Align their strategy to that of a traditional wealth management provider. Such firms employ proven means to offer comprehensive wealth management services to the top-tier customer segments, the UHNW and HNW. Firms already operating in this space have a distinct and well-established lead over potential new entrants. By continuing to focus on the wealthiest customers, they take full advantage of their established reputations and relationships and reduce the degree of organizational and infrastructure change necessary to stay competitive. By deciding not to go down market, they avoid diluting their brands. That said, many established firms will face declining margins as new competitors enter the marketplace and will need to attract the new generation of wealthy as the traditional wealthy client group transfers wealth to younger generations. Firms considering entry into this already crowded market must carefully consider what it will take to be successful. Not only must new entrants create a comprehensive suite of wealth management products, they must package these around the rare talent that can build a core advisory relationship with a demanding customer segment and supply a new level of customer service that most established firms are unaccustomed to providing.

THE EXPANDED WEALTH MANAGEMENT PROVIDER

Mega groups, brokerages and retail banks, match up well against the needs of the affluent and young affluent. The affluent particularly value the wide breadth of product offerings of the 52

Topic - Wealth management

mega groups and their relative strength in planning for retirement; the young affluent value the strength in multichannel access displayed by retail banks and the leadership role brokerages have taken in adopting new technologies. The role of expanded wealth management provider represents the best route for most mega groups, retail banks and brokerages. While these firms typically have a wide client base Overall, they lack an existing wealth-management offering dedicated to the client base in the HNW and UHNW customer segments. By using technology to expand down market to serve the needs of the affluent and young affluent, these firms have the potential not only to increase their potential customer base by a factor of four,6,7,8 they can also establish important relationships with potential HNW customers before they are targeted by traditional wealth Management providers. However, these firms face a range of challenges specific to their individual capabilities. Brokerages will have to broaden their product offerings, mega groups will be forced to address significant gaps that exist in integrated information and tax planning, and retail banks, especially, face an uphill battle. They must significantly improve the competencies of perception and personal touch, as well as offer stronger protection and tax planning products to successfully provide a comprehensive wealth management solution. While there are clearly opportunities and profits to unearth with down market offerings, the challenge is how to serve the corresponding customer segments profitably. Because no one has yet done it well, expanding down market is a high-risk strategy. On the other hand, a down market strategy specifically highlights and attacks the critical competencies that make this business costly for traditional providers.

THE BEST OF BREED MANUFACTURER

53

Topic - Wealth management

A narrow focus on specific products and a lack of strong competencies limit the strategic options for all but the largest and most client-focused insurers and asset managers. Building an entirely new set of capabilities and competencies is risky, and firms might be better served by focusing on their core manufacturing competency. A best of breed manufacturer strategy provides the greatest chance of success to the bulk of asset managers and insurers. For these firms, competition in the wealth management space should centre on the design of new and innovative products and distribution through the firms that own the primary advisory relationship. Insurers and asset managers can choose to compete on the basis of scale or by distinguishing their products with value-added services. Either way, forming partnerships with primary advisors is critical to achieving success as a product specialist. Developing new and innovative products to address the evolving needs of clients at a segment-specific level is also critical.

CONCLUSION

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Topic - Wealth management

The constant forward march of technology is opening new markets in wealth management. The automation of business intelligence, an increasingly connected distribution network and advances in CRM are reducing the cost to offer clients comprehensive wealth management services. This reduction in costs furnishes non-traditional providers with an excellent entry point into the wealth management space. However firms decide to approach the wealth management market, their strategy must be appropriate to their capabilities and the customers they want to serve.

Where does your wealth management strategy stand? Figure below lists important questions and key determinants for success that all firms should consider as they construct their wealth management strategy. ROLE

IMPORTANT QUESTIONS

Key

determinants

successful

for wealth

management strategy Traditional 

How will you differentiate your offering in  Focus on providing a

wealth

an increasingly Crowded market?

management



How will you defend current profit management margins against the competition?

provider 

comprehensive wealth 

What is your strategy for filling your HNW segments; create products

business pipeline? 

offering to the UHNW and

Your

customer

base

is

 packaged around the advisory increasingly relationship.

diverse; how will you 



Serve it best?



Who will you recruit to serve your strategy for capturing customers? How will you





Retain the talent you do find?



What is your current process for retaining

Develop a comprehensive

intergenerational wealth transfer.

assets passed on to next generations?

55

Topic - Wealth management



Expanded wealth



management provider

What is your strategy for profitability in

   

a

solution

comprehensive for

traditional,

affluent and

down market segments? 

Build

 young affluent segments; Will you build or buy the technology create offerings packaged platform necessary to around Serve down market clients?  The advisory relationship. Your customer base is increasingly  Take a segment-specific diverse; how will you approach to wealth Serve it best? management: Who will you recruit to serve your UHNW/HNW: personal touch. customers? How will you



Retain the talent you do find?



1If you are already serving the wealthiest technology. 2) Young affluent: segments, how can



1) Affluent: personal touch +

You protect your brand’s strength as you technology interface to move down market?

as

Use primary

3) provide high-quality advice.

Best-of-breed

What is your strategy for forming  Develop new and innovative

manufacturer

partnerships with

products that address segment



Primary advisors?

specific



 needs in one or two areas; Are you designing innovative products products should also be

targeted to 



Specific segments?



 Shift the corporate mind-set to Will your firm compete on scale or through that of a solution provider

product differentiation? 

Advisor friendly.

 that packages advice around How will you encourage advisors to sell products (if competing on

your products?

value 

Added services).

56

Topic - Wealth management

CONCLUSION

As the number of high net worth individuals has continued to rise in the major economies around the world, so has the demand for wealth management services. The private wealth market is a growing one for financial institutions and firms of advisors able to offer wealth management services that meet the demanding requirements of wealthy investors. Increasingly, high net worth individuals look for diversification in their investments to obtain the returns they need to protect and grow their wealth. To draw up the investment strategies their private wealth customers require, wealth management professionals need access to comprehensive coverage of the global financial markets and to the news which affects them. They look for services that enable them to find and filter information quickly and build personalized displays. They also seek purpose-built tools and models to help them analyze instruments, sectors, funds, indices or economic conditions and test the level of risk versus return of proposed investments. To perform, wealth management professionals need advanced portfolio management systems that allow them to analyze their private wealth customers' portfolios, value them in a range of currencies and measure performance.

Wealth management professionals want portfolio management systems that automate administrative functions so that they can spend more time developing good relationships with private wealth customers. Effective portfolio management systems enable wealth management professionals to generate customized reports for customers and colleagues. They also give private wealth customers the means to access their own accounts directly so they can view their portfolio valuation, transaction history or cash position.

Wealth management professionals need to be able to trade quickly to respond to market conditions. They therefore want portfolio management systems that provide access to order entry functionality and market information from a single interface. They look for functionality that allows them to route orders to multiple venues, so they can achieve best price and execution, and lets them track the progress of their orders. They also want portfolio management systems that enable them to feed order information into in-house systems to facilitate trade management. 57

Topic - Wealth management

Reuters offers a range of products tailored to the needs of wealth management professionals. They provide access, from a single platform, to everything they need to operate effectively and support their private wealth customers.

58

Topic - Wealth management

References

1 http://www.ml.com/about/press_release/05142001-2_net_worth_pr.htm 3 www. wikipedia.com 4 Services/PSI Global, 1999. 5 IBM Institute for Business Value analysis.

59

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