Basic Principles of Wealth Management For any individual, the concept of wealth management is new and a territory best dealt with personally. It is unthinkable to let an outsider know the specifics of how much they have and where it is invested. But the reality of it is that when you have saved a considerable amount, it’s wiser to get professionals to manage your wealth and make your money work for you. In the case of a family run office or business, private philanthropic foundation, private trust, and similar entities holding private wealth, it becomes even more important to handle wealth in a way that is fair and profitable to all. This is where the role of a competent wealth manager becomes even more significant. So what is wealth management? In broad and simple terms - Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and other financial services. It also includes asset and liability management, for future pension plans and minimizing the risk of income fluctuations. But before opting for wealth management it is important to understand the basic principles. The do’s and don’ts are many but the three Golden Rules followed by all professional wealth managers remain constant. Rule 1 - Never sell out during panic. It’s not wise to make any major changes to your portfolio when the markets are moving 500 to 600 points a day. Rule 2 - Establish your risk tolerance before you invest. Define in advance how much risk you are comfortable with and re-evaluate it each year. Rule 3 - Keep your focus on the long-term. Your investment strategy should be made when markets are stable and based on your long-term goals and objectives. Even though wealth management sounds like an easy task to handle – it is best left in the hands of professionals who understand and have experience with market forces, and who understand tax structures and tax shelters. There are menacing factors such as taxes, fees, and inflation that can eat away into individual/group net worth even in upward moving markets. Effective Wealth Management requires that one takes charge of the investment process early. And it is highly advisable that the process starts before you have acquired too many financial assets. But, even if you have acquired financial assets or have had them for some time, it’s prudent to review your portfolio from time to time and make sure your wealth grows and keeps pace with inflation. HNI’s in the UAE generally tend to trust their wealth to tried and tested institutions like RAKBANK to secure their wealth. Over the years banks like these have developed processes, checks and balances to minimize risk and maximize returns. They have developed keener insights into market situations and it’s wise to profit from their experience. Abdul Shahid is an independent writer who likes sharing his views on the financial/Banking sector in the UAE. His area of expertise is bank online, insurance, fixed deposit rate, credit cards, loans, mortgages, wealth management, capital management, asset management, investments, mobile banking UAE and a lot more.
Posted on: Mon, 14 Jul 2014 02:45:00 +0000