Wealth Management(WM)

Meaning of Wealth Management A professional service to optimize,

protect and manage wealth An investment advice on loans,

investment and insurance Also advice on tax, estate planning,

business planning and charity foundation. It is an ongoing process with define steps

that involve planning, execution, review and management.

Wealth management Wealth management services are

provided byCorporate entitiesIndependent financial advisorPortfolio managersBanksBrokerage houses

Need for WM Planning Asset Management Risk Management Lending Advisory Services

Wealth Management Process

Understanding Opportunities

and Issues

Planning Wealth

Management Strategy

Supervising and

Monitoring

Implementing the Wealth Management

Plan

Wealth Management Process Understanding Opportunities and Issues

Investors know thyselfUnderstanding values, goals and needsDeveloping rational investment expectation

Planning wealth management strategyImpact of TaxesDeveloping an investment policyImportance of asset allocationIntegrated wealth planning

Wealth Management Process Implementing the wealth management

plan Supervising and monitoring process

Goals of WM Asset Management

Asset allocation aims to optimize return by minimizing risk.

Achieve the goal through diversification and customized investment strategies.

PlanningAdvance thinking and necessary services to

formulate, manage and complete financial requirement

Goals of WM Equity Risk Management

Preserve capital against decrease in value of stock

Generate liquidityDiversify the exposure

Stages in Human Life Cycle Childhood Stage Young Unmarried Stage Young Married Stage Both Partners Working Single Partner Working Young Married with Children Stage Married with Older Children Stage Post Family and Pre Retirement Stage Retirement Stage

Financial Needs Survival Money

Household need for food, clothing and shelter

Liquid instrumentsNeed for emergency situation

Safety MoneyTo meet life’s unexpected turnsTo protect the assetsTo protect the person who generates the

assets

Financial Needs Freedom Money

Funds to support non - basic needsInvestment in short term instruments –

savings, treasury bills, money market fund Gift Money

Charitable institution or foundationEducation and estate for their childrenInvestment in long term instruments –

bonds, mutual funds, equities

Financial Needs Dream Money

Funds required to have all the things that a person dream of being, having or doing

Funds that will need beyond peak income years

Funding for medical expenses after retirement

Invest in long term instruments – bonds, notes, mutual funds.

Asset Classes

Investment Classes

Equity Fixed Income

Securities

Real Estate

Precious Objects

Derivatives and

Structured Products

Commodities

Asset Classes Equity

Rewards associated with equities○ Dividend○ Capital Gains○ Right to subscribe to new shares○ Right to vote○ Right to information

Risk Associated with equity○ Residual capital○ Capital Loss○ Liquidity risk

Asset Classes Real Estate

Residential HouseCommercial PropertyAgricultural PropertySuburban LandReal Estate Investment Trust

Precious objectsGoldSilver

Asset Classes Fixed Income Securities

Issued by govt., govt. agencies, state govt., corporation, municipalities, banks.

Cash flow promised to buyer represent contractual obligations on issuer.

Stream of payments by way of interest and repayment of principal at maturity.

Mutual Funds

Asset Classes Commodities

Includes all kinds of goodsTypes of commodities

○ EnergyPrimary – crude oil, coal, natural gas, nuclear fuelSecondary – electricity, refined oil products, diesel,

petrol, LPGHalf-products – petrochemicals, ethylene

○ Mineral ore – iron, steel, copper, zinc, gold, silver, platinum, aluminum

○ Agricultural food products – wheat, corn, rice, tea, coffee, apple, grapes, cotton, jute, fish

Asset Classes Derivatives and Structured Products

Derivatives – derives its value from some underlying asset like securities, currency, commodities or stock.

Types of derivatives○ Exchange traded derivatives

Future contract○ OTC derivatives

Forward contract

Products in WM Direct Equity Mutual Funds Insurance Structured Products Private Equity Real Estate Estate Planning Commodities