JAIIB | Paper 4 | RBWM | Module D | Unit 1 | Importance of Wealth Management | Part 1 | New Syllabus

Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients.
Using a consultative process, the advisor gains information about the client’s wants and specific situation, then tailors a personalized strategy that uses a range of financial products and services.
In brief Wealth Management Services can be summarized in three stages:-

Wealth management is an investment advisory service that combines other financial services to address the needs of affluent clients.
A wealth management advisor is a high-level professional who manages an affluent client’s wealth holistically, typically for one set fee.
This service is usually appropriate for wealthy individuals with a broad array of diverse needs.

Wealth Management – Broad View

Wealth management can encompass all parts of a person’s financial life.
Instead of attempting to integrate pieces of advice and various products from multiple professionals, HNI may be more likely to benefit from an integrated approach.
In this method, a wealth manager coordinates the services needed to manage their clients’ assets, along with creating a strategic plan for their current and future needs—whether it is will and trust services or business succession plans.
Following are some of the important aspects of wealth management:-

Understanding Investment needs: Clarity of the investment needs should be of the utmost priority to set the direction.
Products and Services: Knowing the right products and services suitable for you will enable you to take the right decision to achieve your financial goal.
Advisory Services: Involving the professionals will enable you to take advantage of their professional experience and expertise.
Estate Planning: Estate Planning is also a very essential part of your wealth management as it ensures and preserves wealth for a longer term.
Wealth Management process involves the following steps:
Assessing the current financial situation of the client.
Identifying financial goals.
Designing a customized solution to achieve the goals.
Implementing the financial strategies into the plan.
Monitoring the results and reviewing the plans.  

Wealth management deals in
Asset Allocation management: The Asset allocation management is an investment advisory fully dedicated to managing investment portfolios with the only focus on initiating the income generation. It aims to balance the risk by moving among investment categories.
Tactical Management: Tactical management helps in selecting the appropriate ways to achieve financial strategies by choosing the best alternatives and tactics.
Diversified Management: Diversifier management team help its clients in providing a flexible model which helps in meeting the need of the client.


Few important and common products and services which are generally offered by wealth management professionals are :-
Alternative Asset
Bonds, Corporate Fixed Deposits, Fixed Maturity Plan & Debentures
Insurance
Mutual Funds
Systematic Investment Plan
Portfolio Management Services
Real Estate Services
Retirement planning
Strategic Business Strategy
Will Writing

Alternative Asset
It is any non-traditional asset with potential economic value that would not be found in a standard investment portfolio.
Due to the unconventional nature of alternative assets, valuation of some of these assets can be difficult for most people, examples of alternative assets would include:
Art and Antiques
Precious Metals
Fine Wines
Rare Stamps
Coins
Sports Cards
Other Collectibles

BOND - Bonds are fixed-income instruments derived from a loan forwarded by an investor to a borrower.
In case of a bond, the issuer promises to pay a specific interest for the life of the bond and the principal amount or the face value at maturity to the investor.
Bonds are generally issued by govts, corporations, municipalities and other sovereign bodies.
Just like securities, bonds are tradable.

Bond Market and Types

Convertible bond –
Convertible bond gives purchaser a right to convert the bond into shares of issuing company.
Quantum of shares & the value of shares are usually predetermined by the issuing company.
However, an investor can convert the bond into stock only at certain specified times during the bond’ s tenure.
It features a fixed tenure and pays out interest payments periodically at predetermined intervals.

Convertible bonds can be further classified as:

Regular convertible bonds –
Regular convertible bonds come with a fixed maturity date and a predetermined conversion price but they give the investor merely the right, and not an obligation, to convert.
Companies generally prefer to issue these types of convertible bonds to the public.

Mandatory convertible bonds –
Unlike regular convertible bonds, these bonds obligate the investor to convert them into equity shares of the issuing company upon maturity.
Since investors are essentially forced to convert their bonds, companies