By Jason King
Wealth Management addresses a wide range of issues. A wealth manager can help you with such issues as: investing a lump sum, deciding how much you need to save in order to retire comfortably, inheritance tax and estate planning, dividing up pension entitlements on a divorce or separation, getting the right types and amounts of life and health insurance, planning to pay school or university fees, deciding how much to borrow and providing a general financial health check.
These are crucial issues for most people and their families, and it’s very important for a wealth manager, or adviser, to have a thorough understanding of clients’ aims and challenges.
It’s generally best to look at the whole of an individual’s financial affairs across the board, not just the issue that is of most immediate concern. It can sometimes be hard to deal with one particular issue in isolation because most areas of financial planning are interconnected.
Initially a wealth manager and client must get to know each other well enough to decide whether to take the relationship further and the best way for it to work. Either in the initial meeting or soon after, this will involve agreeing the broad content and scope of the service and crucially how much it will all cost. The chemistry will need to be right – as a potential client, you should be asking yourself: do I trust this person and can I work with them? And it’s important to settle the practicalities: does this adviser and the firm have the right expertise and can they provide what I am looking for?
There’s likely to be an enormous amount of information to be gathered together about a person’s financial circumstances: savings, investments, borrowings, property, mortgages and other loans, wills and other documents, pensions, life and health insurances, income and expenditure, tax and much more.
But that’s only the start of this stage in the relationship. The planner’s job is to find out what the client wants to achieve with their money, both now and in the future. That means gaining a thorough understanding of their views about such issues as borrowing, investing, spending now and in the future, retirement and estate planning. Most people do not think about their future very much – either in an organised way or from a financial perspective.
In investment terms, there will be specific questions about the level of risk the client is prepared and able to take on. And that will lead to discussion about how various asset classes have behaved in the past and what they might do in the future. The aim is to build a portfolio of investments that will provide the returns the investor wants and needs and with which they are comfortable. This can sometimes take a considerable amount of time.
The next step in the planning process is to make sense of all this information and come up with a range of preliminary conclusions and initial ideas for ways forward.
An important aim of the analysis stage is to identify financial gaps or shortfalls. These could be between income and expenditure now or in the future, pension or insurance provision and several others where some action is needed to bridge the gap between aspiration and reality.
You might need to change your goals and aspirations and you may also need to adjust some of your current patterns of behaviour such as spending and saving. A very important issue is clarity about priorities – what might have seemed to be a high priority at the start of the process might have to be replaced by another need.
Once these needs and wants have been identified, it’s time to do some specific product research into funds, tax wrappers – like ISAs – and insurance products.
There’s the planning part of the process, where the end result is a plan of action; and then there’s the implementation, where the outcome is a set of actions that carry out the plan.
Wealth managers are generally able to undertake both functions – for example, first recommending a suitable portfolio of investments and then making the necessary purchases and sales. But sometimes planners will work with other professionals like lawyers and accountants who can provide specialist legal and tax advice and help with the implementation of aspects of the plan.
Most clients want their adviser to keep an eye on their investments and other financial arrangements; you could, for example, receive periodic valuations, attend meetings or have phone calls on a regular basis, or as and when needed. The review process is intended to act as a catch up with what has changed – either in your own circumstances or in the financial world generally.
Much of the groundwork has already been done earlier, and so the review is likely to be shorter and easier to carry out than the initial meeting and report. But this might not turn out to be the case where there have been some very substantial changes in circumstances like a marriage, divorce or a substantial inheritance.
It is possible to carry out your own wealth management if you have the knowledge, time, patience and self-discipline however there are many reasons why you probably won’t want to – even if you do have all these characteristics. For many it is simply that they would rather spend the time they have away from work enjoying the company of friends and family rather than pouring over investment statistics but for others it is simply hard to make these big decisions alone.