Preparing wealth management at a young age is very important to your financial future. Having a business, savings for retirement, savings for education, every individual has their own financial goals . And has different choices for facing their old age. Every person needs to have serenity in their life, especially on their wealth. That’s why we need wealth management for our present and our future.
Wealth management is investment advisory services to meet the needs of the client’s financial wealth. This is a consultative process because wealth management advisors or wealth managers need to know. What the client wants and analyzing the client’s portfolio to make the best strategy for their financial goals. A wealth management advisor will provide financial services. Such as financial advice, tax services, accounting, legal planning, retirement planning, or managing the client’s wealth.
Wealth management is not just about investment advice.
But it will include all clients’ financial needs. The various financial products depending on their needs. More net worth that individual or company has, more complex the financial needs will be. For example, high-net-worth individuals will choose to hire a wealth manager to manage all their financial needs. From coordinating the taxes, investments, until creating a financial plan on a long-term scale.
Not all individuals need a wealth manager to manage all their financial needs. Sometimes the clients only need a wealth manager for the specific financial field, with the person specializing in particular areas. A wealth manager will be chosen based on their primary focus. And the expertise to maximize the probability of success in fixing the financial issues in a specific area. For example, when someone wants to hire a wealth manager for their retirement plans. They will look at the wealth managers who have the expertise to create the retirement savings account or insurance. The wealth manager will provide a retirement plan with savings and investment planning for the client’s near future.
The wealth manager will start the strategy by knowing what clients want and knowing their financial portfolio. After knowing the client’s financial situation, the wealth manager will discuss the probability. And the risk from the client’s original plan. The wealth manager will advise about the second opinion, give better suggestions, and meet the client’s financial goals. The wealth manager will analyze the progress. And try to meet clients on a monthly schedule to review and rebalance the financial plans. If some issues happening along the way. The wealth manager will investigate and try to communicate with their clients. About how to maintain the good things keep on the track. The ultimate goals are the client’s satisfaction and having long-term financial goals.
What is the difference between a wealth manager and a financial advisor?
Both careers have the same attract to achieve the client’s financial goals. Both wealth manager and financial advisor is the finance professionals. That have expertise in completing financial issues. And providing financial plans to their clients. The critical difference between these two careers is the definition of the profession. The financial advisor is a professional who manages the finances of the client’s daily income. And expenses who want to go to the next level on their financial goals. The wealth manager is a professional who manages the real wealth from their clients. And tries to maintain and to increase their client’s wealth. The level of wealth managers is a little bit higher than the financial advisor. Because of the financial situation both of their clients.
Financial advisors usually assist with lifestyle planning. For the clients that are new to manage their finances. A financial advisor will help them manage their budgeting, savings, investments, and cash flow planning. The goal can be short-term or long-term. Depend on the clients how far they want to increase their financial wealth as far as they can. On the other side, wealth managers usually work with high-net-worth individuals, which has more complexity in their wealth situation. The wealth manager needs to complete their financial issues like risk management, capital gains planning, or estate planning.
There is no difference in the education requirement for both a financial advisor or wealth manager.
Because they all are the same as the primary financial education. What makes a difference with these two professions is that wealth managers need. To have expertise in estate planning or risk management. Which has a different complexity level than managing a daily budget. The certification of the wealth managers is called CPA (Certified Public Accountants). And the certification of the financial advisor is called CFP ( Certified Financial Planner). Both of the certifications need to passing a comprehensive exam before they can provide financial planning. Or giving financial services to their clients.
When someone is having trouble with their financial situation. They will seek to hire a financial advisor to advise their financial situation. What they want to do is fixing what makes a problem in their financial situation. And start to make progress along the way. This will be a different level with someone who has big money in their pockets. High-net-worth individuals are often choosing the wealth manager by looking at their experience. How much experience they have, and how much study case they already complete through their journey. Because someone who has a large amount of money will not easily trust someone else. About managing their money or financial plans.
Wealth Management Example
This will help you understand the importance of Asset management in business. In other words, how to manage a company’s assets and avoid those assets. That are no longer required to save on costs. Using a financial management system, it is possible to organize all your company’s accounts into one single balance sheet. It will show the gross amount of assets, expenses, and liabilities. The key here is to categorize your assets and liabilities according to their value.
Here are some examples of assets and liabilities: Income from property or land, assets that are not fixed like stock, inventory and capital cost, capital cost investments, interest expenses, and deferred income. These are all categorized as to their importance and as to their rate of return. Here are some examples of cash flow, which are accounted for in the financial statement: Cash received by the company, cash paid to employees or owners, amounts paid to vendors, and those charges for maintenance. All these are categorized based on their cash and capital values.
A company’s books can be very complicated. They can be confusing, especially when the number of assets and liabilities and even the income and expenses do not fit into one file. It is common for a business owner to use this Wealth Management Example to help them sort out the financial statement.
It would be necessary for the accountant to record the various items mentioned above on the financial statements.
And any other item that might be relevant. For example, an asset that is not used to produce any value for the company would be recorded as a capital cost on the balance sheet, which would add to the liabilities.
As such, the accounting books of a company’s accounts can be organized by asset classes. The accounting consultant should go through each section of the financial statement and categorize the assets and liabilities accordingly. He can also provide support on items like improvements and depreciation, which may impact both the net book value and the gross book value.
The bank must pay close attention to the company company’s assets because if they were to be sold to a third party, it would affect the company’s future growth. For example, a farm, which is large enough to sustain and educate several generations of children, is an asset that is commonly neglected.
The accounting consultant can help a company’s auditors to cross-check all of the financial statement against other assets.
For example, if the net book value of an asset were calculated and did not match the book value, this would mean that the book value of the asset is significantly higher than the cash outlay that the company made on the asset.
This is where the Accounts Receivable Account is. Since the accounts receivable account is also included in the company’s gross book value, the bank can demand that the company sell its accounts receivable on fair market value. Revenue is another asset included in the Gross Book Value that is classified as on the Income Statement. When the company makes a purchase, the company will generate revenue, and when the company sells an individual item, the company will generate sales revenue. But there is more to be included in the income statement, including costs of materials, labor, and technology.
The Asset Purchase Cost is the purchase price of the asset. The Operating Expenses are the expenses incurred during the month like electricity and gas, supplies, furniture and equipment, storage, cleaning and maintaining the asset, and employee benefits. The Cash Paid Out, and Cash Paid In expenses are the expenses that relate to the use of the asset. It will be best to create an inventory of the total assets worth more than the liabilities. Also, they should be recorded in separate files.
Wealth Management Business Structures
Wealth Management Business Structures are the administrative structures that provide banking services for the business. These structures are usually of three types, namely; Debt Management, Mortgage Processing, and Pensions.
A business structure is a system that divides the duties and responsibilities of a business unit into different types and levels. When a business receives loans from banks or other financial institutions, it passes on some of its responsibilities to the debt management or Mortgage Processing Company. This ensures that the loans are paid off and that their employees are paid. Other types of financial institutions that offer professional financial advice include corporate finance firms, structured finance companies, and wealth management service, providers.
The Mortgage Processing Company would be responsible for analyzing the client details, the client’s proposal, the legal aspects involved, and the financial aspects involved. This company’s idea is to establish the client’s financial future in terms of repayment of the loan. Once this has been done, the financial future is determined. If there is a need for restructuring, the borrower would be required to reimburse a percentage of the debts so that the company does not have to pay them all. In this way, the company minimizes its risk.
The debt management or Mortgage Processing Company is the business structure that works with the client to organize the finances of the client.
It requires the authorization of the banker’s official in charge. When a client is unable to pay its debts, the banker will make arrangements with the Bank Administration Company (BAC) of the Bank of International Settlements (BIS). This company handles the transfer of the funds to another banking institution so that the client can continue to repay its debts.
Financial instruments such as certificates of deposit and certificates of insurance are also exchanged between the bank and the creditor’s parties. This is used to resolve conflicts of interest between both parties as well as to prevent the creditor from having to face a claim for payment by defaulting on its obligations. The wealth management companies handle the administration and management of the client’s financial affairs. Such Companies are affiliated with other banks and also deal with financial institutions.
They can also be associated with other financial institutions to make their client’s accounts available to other clients. They can also get their client’s assets sold off and get their financial statements audited by another firm.
Another type of wealth management Company is a Pensions Management Company.
Here, the client’s assets are divided into the profit and loss account so that the company’s staff is capable of repaying the creditors as and when needed. The pension fund can also be transferred to another financial institution so that the client can continue to work and to enjoy its financial stability. The ability to transfer assets is controlled by the employee, but if the bank believes that the client would be able to pay its debts, it will not repossess the assets.
The third type of business structure is the brokerage business structure. Here, the company’s assets are divided into two accounts, namely the investment and the profit account.
When one of the assets is not performing to the standards set by the client, then this particular account is closed. It is also required that the investments are made using the client’s hard-earned money and that the investment strategy will ensure the security of the financial assets.