In spite of a global pandemic, wealth management companies are still in hot demand with the number of new millionaires and billionaires still growing, with the number of ultra-high nets worth individuals seeing a 24% gain in countries like the US according to a January Investopedia news report.
But what do we know about wealth management, and how are these firms coping so well in the midst of a global financial meltdown?
Many investment firms describe the services that they provide as wealth management. It is effectively the process of generating income using an individual’s current wealth. In some cases, successful businesses hire wealth managers to grow their surplus through financially savvy investment strategies.
For a business and individual these services commonly include advanced planning, stock options, financial risk management, tax planning, and engaging an estate planning attorney. Services tailored for individuals may also include education, buying insurance policies, planning for retirement, and creating a legacy. The latter process is aimed at ensuring that a beneficiary or loved one will benefit from an asset left behind by a deceased individual. Legacy planning involves protecting an individual’s assets, typically through a tax-advantaged vehicle. In doing this, the investor can ensure that the future of a loved one or a cause they care about is protected.
Usually, if we take the services of a wealth management company out of the equation, financial services are acquired by individuals or businesses from different companies and there is little coordination between them. However, with a wealth manager in place, all financial aspects of an individual are controlled under one roof, and as such, a fully coordinated and researched growth strategy is in place.
Companies like South Pass Partners headquartered in Japan are a great example to look at as the firm offers a wide range of wealth management financial services, such as private offshore wealth management, legacy planning, protecting wealth, asset management, investment advice, and portfolio structuring.
Most wealth management firms offer two approaches to wealth management or specialize solely in one of the following two approaches:
- One is aimed at managing the money of high-net-worth clients
- The other is aimed at the general public
You should check a wealth management firm’s disciplinary history before committing to them. These professionals should be highly qualified and experienced in the field of wealth management.
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With the scare of the global pandemic and the realization that such a crisis is possible, people panicked and finally took the time to look at how they are managing their wealth. Jobs are at risk, the correct insurances are not in place, and there are those that were simply too busy to take the time to properly arrange their finances e.g., not enough time pre-pandemic to implement a wealth management strategy to optimally manage their finances.
Opening high-interest savings accounts, investing in property, looking for online business investment opportunities, and how to increase wealth are all trending across social media and popular search engines. People are obviously looking for a way to make their money and assets work better for them. Meanwhile, interest in life and medical insurance, plus legacy planning is also piquing.
All this is likely due to long periods of government lockdowns across the globe, and as a result, people have had plenty of time to think about and research multiple financial options.
For the financial wealth sector, those seeking financial planning due to macro-economic issues a positive. While many of these companies are not looking to gain from a bad situation, the fact of the matter is that with the current world climate as it is, wealth management services will gain from it. However, their gain is our gain because these companies are there to help people better manage their wealth, which can only be a good thing.
As with any business industry, there are both positive and negative influences affecting wealth management companies. Let’s start with the bad news and finish on a high with the good news from a wealth management company’s perspective.
While wealth management entered the new year from a position of strength, the industry is currently experiencing disruptive forces and a pandemic of disruption. It experienced the worst two-year growth since 2022, and much of the industry suffered from depressed margins and uneven cost discipline, leading to negative operating leverage. In the near term, the industry faces significant crosscurrents, including an aging advisor force and increased competition. However, these trends can be beneficial if managed properly, and those involved in the industry are already adjusting.
As we move forward into Q2 2022, we can see that wealth management news stories are focused on a number of issues. The most prominent is the rise of young investors, who are now responsible for nearly one-third of affluent households. Also, the rise in ultra-high net worth individuals inevitably means the wealth management sector will grow alongside this trend as those making their way onto the ever-growing world-rich list seek out wealth management strategies to boost their wealth.
Finally, and as mentioned above, the pandemic has encouraged a greater number of people to manage their wealth more responsibly. Once again, can only be positive for wealth managers as their job is aligned with those seeking to manage and increase wealth. The ensuing partnership of all parties involved is a fair deal, as wealth managers only increase their own profits if they increase their clients’ wealth, so everyone has the same goal—for everyone to be a winner!