The wealth management industry provides services to individuals and families that help them to manage their money safely, with the aim of meeting their financial needs and achieving their financial goals and aspirations.

There is a broad range of services, products and companies offering these. Each of these play a different role and the best approach is to choose a mix of them after doing research and meeting them.

Knowing where to start

Henry is the creative person behind a large fashion label. Through his successful career, and with an inheritance from his wealthy grandmother after she passed away, he has USD8million in cash and assets.

But Henry is busy at his job, so he does not have much time to think about money. Because of this, a lot of his cash is sitting in an ordinary bank account, earning very low rates of interest.

The next time he visits his bank, the manager asks him if there is a reason why he doesn’t make his money work harder for him. Henry has no idea what the manager means and asks him to explain. So he tells Henry that wealth needs to be managed, so that its owner can achieve his or her financial goals and also ambitions.

The manager explains to Henry that there are lots of different services that make up wealth management:

  • Banking is most similar to what Henry knows, but banks offer more than just keeping your money safe by putting it into a bank account. Different types of bank accounts are created to service individuals with differing levels of wealth – typically divided into ‘Private banks’ and the ‘mass affluent’ sections of retail banks (with names like “Prestige”, “Gold” and “Premier”). Both these types offer services like multi-currency deposits, international accounts and overseas mortgages to assist individuals in managing their finances.
  • Investment services are provided at every level in the wealth management industry. The range of the products usually increases in line with the client’s wealth. Clients can drive their own investing activities, receive advice to guide their investment strategy, or simply put their capital in the hands of a professional manager. Essentially clients invest their money in order to achieve a better outcome (or return), or to try to reduce their risk, in comparison to cash left on deposit in the bank.
  • Insurance provides individuals with financial protection and is a basic requirement of any wealth management plan. This is centred mainly on life insurance and protection against the costs of helping with critical illnesses. In these ways, insurance helps to protect against loss of income and can provide a capital boost for a family’s wealth. Insurance is also used as a way to save and grow wealth.
  • Wealth planning is about managing the financial needs of an individual or family through a lifetime, or even across multiple generations if a family, alive and deceased. The primary aim is to plan and execute appropriate investment, wealth protection and wealth succession strategies.

The bank manager also explains to Henry that there are many different products he could buy, delivered by various types of financial companies, all trying to help him meet his goals for his money.

  • Private banks and affluent banks – they tend to cover both the practical banking and investment needs of their clients. This may also include the insurance products discussed above. The banks will also be able to provide long-term wealth planning.
  • Independent financial advisers – they offer a service that focuses on financial planning, investment advice and insurance. The aim is to help individuals to manage their wealth by finding the best combination of investment and insurance products they can find from any financial company. These advisers do not work for a bank.
  • Independent asset managers – they provide investment advice as a stand-alone service, separate to any other advice the client will get. Clients receive investment ideas and guidance, and then buy or sell investments using their bank.
  • Insurance intermediaries or agents – they provide individuals with access to insurance products offered by large insurance companies. An agent might represent only one insurance company or maybe several companies. The insurance agent might offer both general insurance (property or health insurance, for example) and financial insurance (life insurance) and also investment products (investment-linked insurance policies).

Henry now understands that he is missing out on the opportunity to manage his wealth properly, but tells the bank manager that there are too many options to choose from.

He asks the bank manager where to start?

The manager suggests Henry should meet with a selection of private banks and independent advisers. The professionals who work for these companies will start the relationship by asking Henry questions about his personal situation and then his (financial) ambitions.

They can then use that information to guide Henry in creating a strategy for his wealth, which will take into account both his short-term needs and his long-term goals – and at the same time do this so that Henry can achieve his goals.

After these discussions, Henry should understand what will be the best way for him to manage his wealth, and with whom.