What is 'Wealth Management' Wealth management is a high-level professional service that combines financial and investment advice. 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 advice on philanthropic activities.
A financial plan is a comprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans. Most individuals work in conjunction with a financial planner and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing financial plans. These metrics are used along with estimates of asset growth to determine if a person's financial goals can be met in the future, or what steps need to be taken to ensure that they are.
What is 'Money Management'
Money management is the process of budgeting, saving, investing, spending or otherwise overseeing the capital usage of an individual or group. The predominant use of the phrase in financial markets is that of an investment professional making investment decisions for large pools of funds, such as mutual funds or pension plans. Money management can also be referred to as "investment management" and "portfolio management."
Financial advisors are typically associated with brokerage services, offering support for holistic money management plans that can involve estate planning, retirement and more.
In the market, consumers have access to a wide range of resources and applications that allow them to individually manage nearly every aspect of their personal finances. As investors’ increase their net worth they also often seek the services of financial advisors for professional money management.
Wealth Management 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. While the use of a wealth manager is based on the theory that they 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.
Elements of a Financial Plan • Financial goals: A financial plan is based on an individual's or a family's clearly defined financial goals, including funding a college education for the children, buying a larger home, starting a business, retiring on time or leaving a legacy. Financial goals should be quantified and set to milestones for tracking. • Personal net worth statement: A snapshot of assets and liabilities serves as a benchmark for measuring progress towards financial goals. • Cash flow analysis: An income and spending plan determines how much can be set aside for debt repayment, savings and investing each month. • Retirement strategy: The plan should include a strategy for achieving retirement independent of other financial priorities. The plan should include a strategy for accumulating the required retirement capital and its planned lifetime distribution. • Comprehensive risk management plan: Identify all risk exposures and provide the necessary coverage to protect the family and its assets against financial loss. The risk management plan includes a full review of life and disability insurance, personal liability coverage, property and casualty coverage, and catastrophic coverage. • Long-term investment plan: Include a customized asset allocation strategy based on specific investment objectives and a risk profile. This investment plan sets guidelines for selecting, buying and selling investments and establishing benchmarks for performance review. • Tax reduction strategy: Identify ways to minimize taxes on personal income to the extent permissible by the tax code. The strategy should include identification of tax-favored investment vehicles that can reduce taxation of investment income. • Estate plan: Create arrangements for the preservation and distribution of assets with attention to minimizing settlement costs and taxes. Review and update estate panning instruments, such as wills, inter-vivos trusts, power of attorney, medical directives, and marital trusts.
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