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Showing posts with label Financial planners. Show all posts
Showing posts with label Financial planners. Show all posts

Friday, May 30, 2014

Healthy wealth management

THE term “wealth management” came about in the 1990s to describe a complex series of services similar to financial planning. The phrase has also been adopted by accountants, estate planners, lawyers and some finance specialists. These experts cater mostly to high-net-worth clients.

Rather than just perceiving wealth as product of a toil-and-reap process, money can be considered a tool with which you can gain profit
Instead of just spending your money, invest it wisely to get returns.

Unlike professions such as accountancy, taxation or auditing, which involve specialised fields of study where professionals are provided official certifications by governing bodies who supervise the field, wealth managers are yet to require official certifications.

However, the Investment Management Consultants Association (IMCA), the governing body that awards the CIMA certification (Certified Investment Management Analyst), began offering a certification for wealth management in 2007 known as the Certified Private Wealth Advisor (CPWA).

The certification recognises individuals who specialise in the life cycle of wealth – accumulation, preservation and protection and distribution.

They identify and analyse challenges faced by high-networth clients and how to develop specific strategies to minimise taxes, monetise and protect assets, maximise growth and transfer wealth.

What is wealth management?

Wealth management is a system that involves the effort of both experts and clients to design and adopt ideas to manage and grow the clients’ wealth.

Wealth comes in many different forms – hard cash, properties, shares, luxury items, businesses, lands and others.

Managing it, however, involves collective consultative processes that build a specific portfolio for owners. It is a slow and painstaking process that requires the clients’ trust and the consultants’ patience.

Deciding to involve a wealth manager in planning your finances is an important step.

It requires you to entrust the management of your wealth to someone else.

However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.

What wealth managers do is enhance wealth while providing a valued experience for clients. In addition to learning about the many financial areas, those undergoing the CPWA certification study family dynamics.

This includes the study of anthropology and building relationships based on shared experience.

This is particularly important if the wealth involves a few generations of a family.

The difference between wealth managers and financial advisors is that wealth managers are a niche group of people.

They have cultivated specific tools and skills over the years and have a relatively small number of clients.

They can also apply distinctive designs and have a better skill set compared to other more common models.

Wealth as a tool

A common mistake that people make is to see income as a figure to make purchases with.

Having wealth does not necessarily translate into profitability.

Rather than just perceiving wealth as a product of a toiland-reap process, money can be considered a tool with which you can gain profit.

In this circumstance, having professional help will evolve this tool into a working design that will snowball into a self-sustaining model. The process often involves a lifestyle change for clients as well.

Even those who do not fall within the high-net-worth bracket should consider getting consultancy aid since the nature of wealth management allows it to be adaptable as a tool to manage one’s situation even when in deficit.

Behavioural issues

Humans are generally protective of their finances, therefore a new concept such as wealth management may not be easily accepted as it is still largely unexplored and remains unknown to many people.

As a result, finances are normally made stagnant or spent, not giving much return to its owners if not put in a bank or invested with little or no returns.

K. Gunesegaran, financial planner and money coach from Wealth Street Sdn Bhd, was recently a guest on BFM (a Malaysian radio station) and spoke about how to keep emotions in check when dealing with money.

He suggested that adhering to a certain behavioural portfolio regardless of the market’s response and adopting a shared behavioural framework that clients and investors can agree on and adopt in any finance management context offer a good solution to the behavioural issue surrounding wealth management.

Towards a bright future

As Malaysia readies itself for the increase urbanisation of its cultures and communities, the growth of wealth will mean more opportunities for the wealth management field to develop.

By substantiating certification and licensing as well as educating the changing demographics about wealth management, the field will gain more recognition within the finance industry.

Creating a niche market of professionals is also a better option than generalising the industry’s talent.<

For example, a wealth manager who specialises in real estate or the ICT industry would prove to be better than a general wealth manager in certain contexts.

Scouting for a niche specialist wealth manager, especially if the wealth involved is derived from or being invested into a certain industry, would then be a better approach to handling wealth.

However, as a client, the first step is to better understand how you would like to use and invest your money before seeking professional help.

The role of a wealth management consultant

Deciding to involve a wealth manager in planning your finances is an important step. It requires you to entrust the management of your wealth to someone else. However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.

Most banks offer wealth management services catered to highnet-worth individuals. There are also private, stand-alone wealth management firms that not only act as advisors but as executors of clients’ instructions pertaining to their finances.

The biggest challenge for a wealth manager is to understand the financial needs of the clients.

It is important for clients to understand the role of wealth advisors to ensure their credibility and market value.

Experts need to convince middle-income and low-income earners of their skills, as these earners have the potential to become higherincome earners.

This creates business opportunities and expands networks, which is the perception of wealth management that the industry is aiming for.

This is important because their relationship with clients is not usually a short-term one and the advice and information given need to be accepted by clients with trust and understanding.

There is no one way to manage wealth because people’s lifestyles differ and different people require different aspects of their wealth to be managed, including tax management, risk assessments, retirement planning, portfolio management, estate planning, generational legacy, trust fund managements and specialised services for executives and small business owners.

Sources: Money & You, StarSpecial


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Saturday, March 31, 2012

Personal finance: what rich Asian women want for their money?


Starting today, StarBizWeek features a column on personal finance called Money & You, which will focus on money matters as they relate to YOU. Our two writers will take turns every fortnight to shed light on personal finance matters.

■ Yap Ming Hui is an independent financial advisor and author of five best-selling books on personal finance. He is the managing director of Whitman Independent Advisors, an independent financial advisory firm licensed by Securities Commission and Bank Negara Malaysia. Since 2000, Yap and his team of licensed independent financial advisors have successfully helped numerous clients achieve financial freedom. Yap believes that all Malaysians can fully optimise their wealth using a holistic wealth management approach.
 
Carol Yip, founder of Abacus For Money, believes that if people understand their money mindset, behaviour and money psychology, they can be financially happy and successful. She actively promotes financial literacy and intelligence within families and for women, youths and retirees.

MONEY & YOU By CAROL YIP

WOMEN in Asia are building and inheriting more wealth than ever before. According to Boston Consulting Group (BSG) 2010 report, the percentage of wealth controlled by women in Asia (ex Japan) is rising nearing 30% annually and total wealth controlled by women reached RM2.8 trillion in 2010. Their heightened visibility in financial circles can be traced to more women achieving success in the workforce and a greater number of women actively managing family finances. Kim Sung-Joo recently made her debut on the inaugural Forbes list of Asia's Power Businesswomen in celebration of International Women's Day recently. She is the youngest daughter of an energy conglomerate tycoon in South Korea and created her wealth from luxury fashion.

The increasing number of wealthy women is also partly because they are inheriting wealth due to their longevity. Puan Sri Lee Kim Hua, 81, widow of the late casino magnate Tan Sri Lim Goh Tong, is one of the 40 richest Malaysians on the 2012 Forbes Asia list.

Without a doubt, Asian women are creating significant financial visibility. But are bankers and wealth advisors paying sufficient attention to this alluring segment of the market?

Women of wealth

Based on research conducted in 2011 by the Family Wealth Advisors Council, a network of US-based, independent fee-only wealth management firms, the financial services industry has a long way to go if it wishes to provide the kind of service wealthy women say they want. The title of the study of high net-worth American women says it all: “Women of Wealth: Why Does the Financial Services Industry Still Not Hear Them?”

Involving 551 women across the United States with a net worth of US$1mil or more, the study collected survey questionnaire data across marital status, employment status, age and net worth. The research looked at what worries wealthy women:

About 86% of working women surveyed consider obsolete careers and eroding earning power as risks to their financial success;

Married women believe health challenges present a greater risk to their financial security than the death of a spouse;

About 96% of women want their unique circumstances and their entire life picture understood by their financial advisor;

About 80% of women (either married or divorced) believe that they will be called on at some point to help one or more of their children in a crisis;

About 81% of retirees see a potential decline in the economy as a major risk, versus 45% of full-time working women; and

About 57% of married women feel that divorce poses a significant risk to their financial well-being.

With women's economic clout in the workplace and purchasing power in all consumer and commercial markets increasing, their dissatisfaction with the financial services industry is also growing. The study clearly showed that women do not like to be considered a monolithic group, but want services tailored to their specific circumstances. Evidence suggests that wealthy women in Asia Pacific are also having similar experiences.

Different women different needs 

As more women call the shots on money, they also want their wealth advisors to do a better job of meeting their needs. They want the same attention, advice, terms and deals that men get with advisers who provide investment recommendations. But, at the same time, women want advisors to tailor services to them because they have very different needs and expectations than men.

In the BSG survey, women said advisors tend to assume they have a lower risk tolerance than men, so advisors provide only a narrow range of investment alternatives. Some women claimed that advisors for women are too quick to focus on strategies that don't emphasise on performance, assuming that women are more inclined to make investment decisions based on social issues. With these and other study insights, wealth advisors who service female clients should foremostly recognise that women want to be treated differently. Some suggestions come from the findings:

Women want to be understood as unique individuals. They want an advisor who listens to their needs and is trustworthy. A fiduciary advisor who knows how to create strategic investment allocations based on a women's situation, goals and risk appetite will stand a better chance of securing their business.

Women are looking for advisors who can provide advance planning, relationship management and investment advice a one-stop boutique financial centre.

The wealth advisor's gender plays an important part of the financial planning process for wealthy ladies. Female wealth advisors will be able to relate better to their situations and challenges than men.

Women's investment attitude

It's no surprise that women's behaviour as earners, investors and savers is the subject of a large and growing body of behavioural economic research, which has yielded important findings. Women prefer to focus on long-term investment goals and seek holistic advice. When women invest, they tend to look for informed advice and better rate of return than men. Women can be too conservative in their approach, especially given the fact that they tend to live longer than men. Ultimately, from the way they seek financial information and advice, to their understanding of the long term, women's financial behaviour holds crucial lessons for all financial advisors.

Women may also tend to limit their trading far more than men do. They prioritise by protecting principal rather than taking risks to grow their assets. A study by the University of Michigan's Retirement Research Center finds that men frequently and unnecessarily trade their holdings. All other things being equal, the male participants trade 56% more than their female counterparts, and the more they trade, the worse their performance becomes “a result of a too-rosy estimation of their own investment skills,” the researchers write.

The landmark study on gender differences in stock investing also finds that men tend to sell too early, or to swap assets for new ones that underperformed what they havve sold. By contrast, women are more inclined to take the long-term view and understand that performance in many cases are best measured over time.

Huge potential 

Women's financial behaviour and preferences across varied situations show major differences from men's. Women's financial strengths are significant. So are their challenges.

The provision of tailored wealth management services for wealthy women is much needed. There is a unique opportunity for the financial services industry to design investment, insurance, trust and estate planning products and services that better address women's needs, psychological preferences, life values and different life stages.

Wealth is a “means of life planning rather than a goal in itself” for women. The one-size-fits-all concept is no longer appropriate. Customised fitting is always the preferred choice to make wealthy female clients happy. Wealthy female clients will be loyal customers when wealth advisors deliver the results they want. A long-term trusting client-advisor relationship will be the result.

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