PRIVATE WEALTH MANAGEMENT (Everything you need to know)

Transferring wealth from one generation to another is a function of financial prudence. Most multi-billion-dollar businesses have been managed by offspring of the business owners for years, carrying on legacies that transcend personal interests.

In a bid to create wealth, the owners of these businesses must delay some self-gratification to achieve their goal of wealth creation. Private wealth management is mostly sought by the wealthy, those who have amassed great financial returns either in business or investments. The need to secure these investments and grow their dividends necessitates the demand for private wealth managers. These individuals manage the wealth of the influential, those with great affluence and wherewithal.

WHAT IS PRIVATE WEALTH MANAGEMENT

Private wealth management is a range of financial services offered to high-net-worth individuals. These asset managers handle financial portfolios, asset management, and protection among other financial planning matters. They provide services for the stupendously rich folks who have a net worth in investable assets. The high-net-worth investors are further classified into the following

  • Sub-high net worth investors are those investors with investable assets that are between $100,000 – $ 1,000,000
  • Upper net worth investors are those investors with investable assets that are within the range of $5,000,000
  • Ultra-net worth investors are those investors with investable assets that are more than $30,000,000

The yardstick for making this assertion is based on accrued revenues generated from investments. According to Forbes, the criteria utilized for determining the world’s richest is hinged on the individual’s assets which embrace revenues from stakes in real estate, public and private companies, cars, horses, cash in hand and bank, yacht, etc.

Who needs private wealth management? That is the salient question, and the truth of the matter is that everyone deserves some level of financial guidance and management but as the name implies, the private wealth managers tend to the high-profiled individuals because they are in the business to make a profit as well. Talk about the business tycoons, oil magnates, leading tech innovators, top fashion brand owners, and a host of several others who seek the expertise of these private wealth managers in a bid to receive professional financial advice.

TYPES OF PRIVATE INVESTMENT MANAGERS

There are two types of private investment managers, which are registered asset and investment advisors, and we will be looking into them in a bit.

REGISTERED ASSET AND INVESTMENT ADVISORS

These private wealth managers are intellectuals who have been academically certified to handle financial investments of clients with a net worth of at least $5,000,000. Having received the certified private wealth advisors’ certificate, these asset managers have the license to advise, manage and grow the investments of the upper net worth investors and the ultra-net worth investors

The benefits of having these professionals manage a portfolio of this worth are solely due to the expertise garnered from experience and academic insight. They are highly sought out by business tycoons and people of great affluence and influence to proffer the right financial plan that will secure and grow their investments.

EXAMPLES OF REGISTERED INVESTMENT ADVISORS

  • Plante Moran
  • Appleton Partners
  • Personal Capital
  • Wealth Enhancement
  • Carson Wealth
  • Parallel Advisors
  • Strategic Capital Allocation Group
  • Sanctuary Advisors
  •  Annex Wealth Managers
  •  Mutual Advisors

INVESTMENT BANKERS

Since private wealth management is premised on financial planning, some financial institutions such as banks have taken it upon themselves to create a portfolio account that tends to the need of these high-net-worth investors.

investment bankers assist customers such as companies, governments, and individuals to raise capital by issuing and selling investments such as stocks, bonds, shares, etc. leveraging on their financial advisory roles, most investors have made a remarkable profit from their investments.

 ROLES OF INVESTMENT BANKS

  • These investment banks assist their customers in having access to top investment portfolios ad provide opportunities that enhance the growth of their investments       
  • Provide insight and advice on financial investments using their professional expertise     
  • They help businesses to raise debt capital and equity

 EXAMPLES OF INVESTMENT BANKS

  • JP Morgan Chase
  • Goldman Sachs
  • Morgan Stanley
  • Credit Suisse
  • HSBC
  • Barclays
  • UBS
  • Lazard
  • RBC Capital Markets
  • BNB Paribas

FAMILY OFFICES

Wealth transfer is beginning to gain ground, especially amongst the wealthy as most of them seek ways to manage and grow their wealth such that the next generation can benefit from the proceeds of their resources. So, many of these individuals employ methods that are borne out of the sheer necessity to preserve and transfer these fortunes.                              

To carry out this purpose, these wealthy individuals either set up a family office or get an established one to manage their investments and this they do through the help of family offices. A family office is an organized structure that oversees the management of the financial investment of a high-net-worth investor.

TYPES OF FAMILY OFFICES

TRADITIONAL FAMILY OFFICE

In this type of private wealth management, a wealthy family forms a legal structure that allows them to utilize the expertise of a family office to manage their family’s assets through the help of asset management professionals.

MULTI-FAMILY OFFICE

These private wealth managers perform the same duties as the traditional family office because they secure and manage their investments through the assistance of financial advisors. The only difference is that the services enjoyed by the wealthy family are also extended to other clients of the same status.

OUTSOURCED FAMILY OFFICE

This type of private wealth management entails the utilization of a network of financial advisors to manage and oversee the family’s investments and assets. These roles can either be seen in their bill payments, tax preparation, and other financial commitments. Here, the family receives a more enhanced financial status.

ROLES OF A FAMILY OFFICE

Employing the roles of accountants, financial advisors, and lawyers, the family office provides investment management advice and plans that are geared towards growing and upscaling the family’s financial estate. The functions of a family office are mainly the following

MANAGEMENT OF ASSET AND INVESTMENT

Relying on personal financial acumen has resulted in great financial loss and fund misappropriation within some family-owned businesses and investments. This is the reason for the engagement of private wealth management structures to enhance the security and growth of their investments.

Family offices enhance the growth and accumulation of wealth, ensure there is security tethered to the investment options that are chosen by their clients, and further develop strategies that preserve the wealth such that it transcends the current owners and trickles down to the next generation.

The family office helps these wealthy families in the management of their investments and assets through the

  • Management of their investment portfolios such as stocks, shares, bonds, insurance, etc.
  • Takes care of the financial records of the family businesses
  • Prepare the client’s tax bills and remittances
  • Handles other financial commitments such as donations, charity works, and other humanitarian services

LIFESTYLE MANAGEMENT

The wealthy have always had some distinct lifestyle cravings, the thirst for luxury.

They have inclinations toward acquiring the good stuff of life, the choicest and most expensive things grace their daily life. From their attires to their pieces of jewelry, all attesting to the life of affluence they display with every given opportunity.

From overcoming their physiological needs, many have gone on to satisfy other needs such as the acquisition of private jets, yachts, islands, mansions, and other luxuries of life. So, the family office caters to these needs by providing financial advice that will guide the spending habit of these individuals.

Here are some of the roles played by the family office in the lifestyle management of wealthy folks

  • They perform due diligence on the members of staff employed by the family
  • Management of family’s properties and investments
  • Managing privately owned yachts, jets, vehicles, and other luxury acquisitions
  • Providing security for the family and the business as well
  • Providing educational career advice

PROVIDING A LEGACY PLANNING STRUCTURE

several businesses that have outlived their owners have managed to survive many economic downturns, market fluctuations, and business restructuring. These businesses lived through these times because of good business acumen coupled with well-structured wealth management plans.

These businesses had legacy plans enshrined in their setup and that is the reason for their transcendence. Planning a business that will be managed by future generations requires good financial advice and a better business structure. So, the family office in collaboration with the investors makes business plans that secure and promote the investments in a way that ensures it thrives and blooms to retain resources that can serve the next generation.

When wealth is created, it is further invested to birth more wealth but when it is transferred, then a legacy investment has been set up, one that yields more dividends that last for many generations to come.

HOW PRIVATE WEALTH MANAGEMENT WORKS

Managing the wealth of the high-net-worth investors comes with a price. The private wealth managers handle these portfolios in a bid to make a profit as well. So, how then does private wealth management work?

Do they get hired and treated like other members of the staff? Are they on their boss’s payroll for rendering these financial services?

Private wealth management works in the following ways

FEE-BASED PRIVATE WEALTH MANAGERS

These private wealth managers provide services based on agreed fees with their clients. Therefore, it is safe to say that they are added to the companies’ payroll and paid at the execution of every job.

When the term of employment is satisfied, the private wealth manager sets out to carry out the designated roles which have been stipulated. The agreed fee can be reviewed to reflect future earnings, a scenario that is solely subject to the employer and employee.

COMMISSION-BASED PRIVATE WEALTH MANAGERS

The commission-based private wealth investor manages assets and investments but gets paid based on a commission basis. Sometimes, the commission is structured to be earnings made from the proceeds of any financial investment made by the investor.

WEALTH MANAGERS

Wealth managers are seasoned professional advisors who cater to all the financial needs of their clients for an agreed fee. They organize, oversee, assign, and delegate all responsibilities that are hinged on their client’s finances. This also entails the legacy planning of the investments for future gains.  They are like a one-stop shop for an investor’s financial needs.

FINANCIAL PLANNERS

Financial planners are also professional advisors who plan and manage investments to raise a significant amount of wealth more comprehensively. There are three different types of financial planners. We have the

  • ROBO ADVISORS

These are automated investment advisors that are online. They offer this financial guidance through a set of programmed algorithm calculations that matches the intended financial investment with targeted figures.

  • IN-PERSON FINANCIAL PLANNERS

These financial planners are the ones that are met in person either through a scheduled meeting or an appointment. The investor can engage in a personal conversation with the financial planner and get a tailored service that best fits the intended financial need.

  • ONLINE FINANCIAL PLANNERS  

These financial planners are mostly virtual investment personnel who work from the comfort of their homes or offices. They provide assistance and guidance to visitors on their website who seek a professional tutelage in investment management.                                        

The investor can also schedule appointments with the financial planners to enable them to make informed decisions on their investment choices.

                  EXAMPLES OF FINANCIAL PLANNERS

  • Morgan’s Financial and Mortgage Services
  • Dynax Invest
  • Cassaday & Company
  • Simon Quick Advisors
  • Ameriprise Financial
  • Callahan Financial Planning
  • IBI Investment House
  • Centurion Wealth Management
  • Integral Financial
  • Hall & Company

INSURANCE AGENTS

This type of private wealth management is hinged on taking adequate steps to secure lives and properties within the ambits of the law and personal interest. The insurance companies design policies that seek to protect an investor’s investment through the purchase of insurance cover for a fixed premium to enjoy a certain amount of indemnity when there is loss or damage                            

This coverage is done for a period within which the assured is entitled to some benefits during the period of insurance cover. The insurance firms get these policies across to their clients or prospects through their insurance agents. There are also investment portfolios that the insurance company handles that can be of immense benefit to an investor.

LAWYERS

The high-net-worth investors are quite particular about their fortunes and taking steps to further procure a legal framework that protects their investments is a step in the right direction. The lawyers prepare legal documents which cover their clients’ contracts and investments within the bounds of the laws. They are a significant part of an investor’s portfolio as they ensure every decision taken is backed by some legal structure to avoid right infringement and asset protection.                

In conclusion, private wealth management is an important aspect of any thriving business or wealthy individual. They seek this route to secure, manage and grow their investment for more profitable returns and better financial disposition.