THE term “wealth management” came about in the 1990s to describe a complex series of services similar to financial planning. The phrase has also been adopted by accountants, estate planners, lawyers and some finance specialists. These experts cater mostly to high-net-worth clients.
Unlike professions such as accountancy, taxation or auditing, which involve specialised fields of study where professionals are provided official certifications by governing bodies who supervise the field, wealth managers are yet to require official certifications.
However, the Investment Management Consultants Association (IMCA), the governing body that awards the CIMA certification (Certified Investment Management Analyst), began offering a certification for wealth management in 2007 known as the Certified Private Wealth Advisor (CPWA).
The certification recognises individuals who specialise in the life cycle of wealth – accumulation, preservation and protection and distribution.
They identify and analyse challenges faced by high-networth clients and how to develop specific strategies to minimise taxes, monetise and protect assets, maximise growth and transfer wealth.
What is wealth management?
Wealth management is a system that involves the effort of both experts and clients to design and adopt ideas to manage and grow the clients’ wealth.
Wealth comes in many different forms – hard cash, properties, shares, luxury items, businesses, lands and others.
Managing it, however, involves collective consultative processes that build a specific portfolio for owners. It is a slow and painstaking process that requires the clients’ trust and the consultants’ patience.
Deciding to involve a wealth manager in planning your finances is an important step.
It requires you to entrust the management of your wealth to someone else.
However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.
What wealth managers do is enhance wealth while providing a valued experience for clients. In addition to learning about the many financial areas, those undergoing the CPWA certification study family dynamics.
This includes the study of anthropology and building relationships based on shared experience.
This is particularly important if the wealth involves a few generations of a family.
The difference between wealth managers and financial advisors is that wealth managers are a niche group of people.
They have cultivated specific tools and skills over the years and have a relatively small number of clients.
They can also apply distinctive designs and have a better skill set compared to other more common models.
Wealth as a tool
A common mistake that people make is to see income as a figure to make purchases with.
Having wealth does not necessarily translate into profitability.
Rather than just perceiving wealth as a product of a toiland-reap process, money can be considered a tool with which you can gain profit.
In this circumstance, having professional help will evolve this tool into a working design that will snowball into a self-sustaining model. The process often involves a lifestyle change for clients as well.
Even those who do not fall within the high-net-worth bracket should consider getting consultancy aid since the nature of wealth management allows it to be adaptable as a tool to manage one’s situation even when in deficit.
Humans are generally protective of their finances, therefore a new concept such as wealth management may not be easily accepted as it is still largely unexplored and remains unknown to many people.
As a result, finances are normally made stagnant or spent, not giving much return to its owners if not put in a bank or invested with little or no returns.
K. Gunesegaran, financial planner and money coach from Wealth Street Sdn Bhd, was recently a guest on BFM (a Malaysian radio station) and spoke about how to keep emotions in check when dealing with money.
He suggested that adhering to a certain behavioural portfolio regardless of the market’s response and adopting a shared behavioural framework that clients and investors can agree on and adopt in any finance management context offer a good solution to the behavioural issue surrounding wealth management.
Towards a bright future
As Malaysia readies itself for the increase urbanisation of its cultures and communities, the growth of wealth will mean more opportunities for the wealth management field to develop.
By substantiating certification and licensing as well as educating the changing demographics about wealth management, the field will gain more recognition within the finance industry.
Creating a niche market of professionals is also a better option than generalising the industry’s talent.<
For example, a wealth manager who specialises in real estate or the ICT industry would prove to be better than a general wealth manager in certain contexts.
Scouting for a niche specialist wealth manager, especially if the wealth involved is derived from or being invested into a certain industry, would then be a better approach to handling wealth.
However, as a client, the first step is to better understand how you would like to use and invest your money before seeking professional help.
The role of a wealth management consultant
Deciding to involve a wealth manager in planning your finances is an important step. It requires you to entrust the management of your wealth to someone else. However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.
Most banks offer wealth management services catered to highnet-worth individuals. There are also private, stand-alone wealth management firms that not only act as advisors but as executors of clients’ instructions pertaining to their finances.
The biggest challenge for a wealth manager is to understand the financial needs of the clients.
It is important for clients to understand the role of wealth advisors to ensure their credibility and market value.
Experts need to convince middle-income and low-income earners of their skills, as these earners have the potential to become higherincome earners.
This creates business opportunities and expands networks, which is the perception of wealth management that the industry is aiming for.
This is important because their relationship with clients is not usually a short-term one and the advice and information given need to be accepted by clients with trust and understanding.
There is no one way to manage wealth because people’s lifestyles differ and different people require different aspects of their wealth to be managed, including tax management, risk assessments, retirement planning, portfolio management, estate planning, generational legacy, trust fund managements and specialised services for executives and small business owners.
Sources: Money & You, StarSpecial