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Wealth Management 2005 from
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Is it just jazzed-up financial planning?
" By Rob Shipley
Deputy Editor, Jersey Evening Post
WEALTH management is, when it boils down to basics, about investment. And, with so many investment instruments available on the market, it is also about sound advice.
A small minority of those with wealth to protect might have the expertise to oversee their own investments, but for the vast bulk of investors guidance through the maze of possibilities is not so much desirable as utterly essential.This, however, does not stop people – many of whom would regard themselves as sophisticates in the worlds of business and money – from jumping into the complex world of financial planning without adequate preparation in the belief that they are quite capable of handling their own affairs.
Even the sophisticated can fail to appreciate that fully fledged wealth management entails not only a coherent set of investment strategies but also skilful risk management.
For the majority of those whose expertise will fall far short of levels of acumen and experience demonstrated by investment and financial planning professionals, advice is a must.
In advance of determining the sort of investments suitable for an individual, the professional will establish that person’s risk preferences.
He or she will also assess whether those declared preferences are a good match for the client’s circumstances as viewed from an objective rather than the subjective viewpoint.
In the case of high net worth individuals, this personalised approach is developed to the highest levels, with investment professionals spending large amounts of, it must be said, expensive time and effort in the pursuit of the best returns for their clients.
That said, good investment advice is not available solely to the super-rich.
Those with only modest sums to invest can receive valuable guidance from their banks’ specialists and from the many independent financial advisers.
However, in spite of the availability of expert financial counselling, it makes sense for even modest investors to educate themselves in the complexities of financial products.
The aim should not be to supplant professional advice, but to augment that advice with some level of understanding.
Advisers would agree that it is easier to offer useful advice to a client who understands the basic differences between the major categories of financial products and has some knowledge of the specialist language which is so often used in investment circles.
Ideally, although the relationship between an adviser and the client is a professional one, it will also have a human dimension.
At the private banking level of wealth management this will be a major element of the package provided for wealthy clients.
Millionaires and multi-millionaires who form the impression that they are not receiving 100 per cent of an advisers’ attention are unlikely to require his or her services for a protracted period.
However, those with more modest means should not imagine that they should settle for peremptory treatment.
Effective wealth management should be broad – in the sense that it takes into account all aspects of a client’s financial life – and deep – through an awareness of a client’s values and priorities.
The idea that wealth management can apply not only to the upper echelons of society’s distribution of wealth is substantiated by American expert Harold Evensky’s definition of the term.
He wrote in Wealth Management, a 1996 study that is still in print, that ‘wealth management is not much more than a jazzed-up definition of comprehensive financial planning.’
But Evensky fleshes out this very basic definition with important extra detail.
He says that ‘the wealth manager’s focus is his client . . . While the money manager may not even know if his client is male or female, single or married, a doctor, lawyer or candlestick maker, the wealth manager will know all of this, as well as the client’s dreams, goals and fears . . .’
It is, in fact, possible to take these observations further.
In the case of high net worth individuals – but also increasingly in the case of run-of-the-mill investors – advisers take into account not only the client but his or her situation as a member of a family.
As Chad Starpliner, another wealth management theorist says: ‘My litmus test for determining whether a firm or adviser is a wealth manager is fairly straightforward: Do they deliver what they’ve promised?’
And he adds: ‘Are they actually sales people masquerading as advisers?’
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