Everything you need to know about Wealth Management

Wealth management is a branch of financial advisory service that involves consulting affluent clients on their financial needs, goals and investments. In simple terms, a wealth manager acts as an advisor to their client in matters of investments and managing their wealth. They offer tailor-made and personalised financial strategies to their clients based on their individual financial needs. Wealth management involves a broad spectrum of services like legal and estate planning, tax services, retirement planning and more. Affluent clients can seek advice from an individual expert or even hire a bigger wealth management firm based on their business needs. Hiring a wealth management firm will give the clients access to a bigger team of experts as opposed to only one individual. 

 

Wealth managers usually charge a fee based on the services they provide. This fee can differ across each service provider. For example, some wealth managers charge an hourly rate for their advisory services, some charge a flat rate etc. Most of these managers charge a certain percentage of assets they manage. You can generally see this fee in the range of 0.50% to 1%, but this varies across different accounts. While this percentage can seem like a very small number, affluent clients usually have a very big portfolio that ranges in millions of dollars. Since affluent clients have a high net worth, it’s important for them to be able to trust their advisors and consultants. It’s because they’re dealing with a lot of money. This is why the designation and background of their advisors is crucial. The top 3 financial certifications include Chartered Financial Analyst, Certified Financial Planner and Personal Financial Specialist. Before you hire a professional service or an individual to manage your wealth, it’s also important to vet their credentials and past work in the market. This is to avoid getting stuck with a service provider you can’t trust. Just like there are many investment banking firms in India, there also exist many wealth management firms that specialise in this particular division. 

Investment Banking vs Asset Management: What is the better career choice for you?

Finance is a world full of opportunities for budding entrepreneurs and individuals with a financial background. It offers lucrative career paths to finance students because the jobs are high paying, and the benefits are endless. But new students can often find it daunting to choose a particular role or path because once you start working towards a particular career, you have to stick with your choice. To make your choices easier, let’s take a look at the two most common areas in the world of finance - investment banking and asset management. 

 

Investment banking

 

Investment banking is the process of creating or raising capital for companies, banks, governments and other entities. Investment banking companies are involved in mergers and acquisitions, new securities underwriting, stock purchases and more. An investment banker’s job can further offer specializations in consulting, banking analysis, capital market analyses, research, trading and more. 

 

Asset Management

 

Assets are an important part of any business, company or organization. In simple terms, it is any resource that is owned by a company or an individual in addition to receivables from others. Asset management is crucial for businesses, especially big companies who often struggle to keep full track of their assets. This is where asset managers come in and help companies stay on the right track, mitigate risks and manage their assets better. They help their clients reach their investment goals through personalised strategies. They work with various clients like individuals, insurance companies, pension funds, governments etc. Their job role includes analysing financial statements, estate planning, advising on complicated buying and selling strategies like investing in long-only funds and more. 

 

The basic education requirement for investment bankers and asset managers is a bachelor’s degree. Moreover, an advanced degree from a prestigious or an Ivy League university is often preferred by the big, reputed companies. Aspirants should often be good at crunching numbers, have good analytical skills, excel in accounting and be knowledgeable in economics. 

 

No matter which career you choose, getting started with a good internship is often beneficial and can help you build a strong network in the finance industry. 

Understanding the basics of hedge funds

A hedge fund is an investment partnership that is offered to accredited investors and institutional investors. In this type of fund, a variety of investors come together to pool their funds and the fund manager invests this money using a variety of sophisticated and aggressive strategies. A hedge fund requires investors to keep their money in the fund for a minimum of one year and nothing less. Investors can withdraw their hedge funds investments by giving their fund manager a narrow period of intimation. As compared to normal funds, these hedge funds are more aggressively managed in order to generate higher returns. This involves using leverage, holding short/long positions in derivatives in domestic as well as international markets. 

 

Understanding accredited and institutional investors

Accredited investors are individuals or entities that are allowed to invest in securities that may or may not be registered with financial authorities. They are individuals who have a net worth of more than one million dollars and earn a set amount of money year on year. 

 

Institutional investors on the other hand are non-bank individuals or companies that trade in securities worth a significant amount. These include pension funds, mutual fund companies, commercial banks, insurance companies and more. They are some of the biggest players in the market because of their financial status. 

 

Hedge funds are less strictly regulated by the SEC or Securities and Exchange Commission. Big investors usually entrust big financial advisory services to manage their hedge fund investments. Due to the high investment values, these investors also expect a significant return on their investments. This is why the main purpose of a hedge fund is to maximize profits and returns. These hedge fund managers employ a number of complex strategies to generate high returns on investments. The most common strategies are classified into event-driven strategies, relative value strategies, macro strategies and equity hedge strategies.