Wealth management helps you to determine the important things in your life, analyze them and then strategize to realize the most treasured hopes and dreams. It is a comprehensive approach to managing your finances which allows you to create, grow and protect your wealth.
The prime factor in prudent wealth management is to understand where you are coming from, the life that you wish to lead, and the challenges you are likely to face. Succeeding in your career, planning your children’s education and marriage and having more than enough for your future to enable you to enjoy your retirement are some of the things that are likely to hold importance in your life.
With the help of a good financial advisor the likes of Smith Barney, Mellon Private Wealth Management, Dundee Wealth Management, UBS Wealth Management etc. you will be able to identify your investment opportunities, borrowings, systematic management of risks leading you towards prudent planning for a better and happier lifestyle. They will help you chalk out a plan to help you achieve the income you need, seek adequate returns and strategies to guarantee you income.
The investing guide’s first rule is asset class diversification. This is essential in achieving your investment goals and managing risks. With increasing volatility in the markets today, predicting the course of the economy in the long run is almost impossible. Thus to attain optimal asset allocation, good judgments taking into account returns and volatility of each asset class should be determined. The function of the financial advisor would be to study the pattern of future returns of one asset class with another and determine to what extent you can attain maximum fiscal protection and profitability.
After determining your financial objectives and risk tolerance levels, the asset allocation process moves on to deciding how much of the portfolio should be in equities and how much in fixed income investments. The allocation is based on long term expectations of risk and returns.
Asset allocation is categorized in terms of long-term, strategic and tactical based on the time limits involved.
Long term asset allocation is optimal diversification derived from using long-term market returns based on more than 25 year cycles.
Strategic asset allocation is between five to ten year return expectations and depends on the changing economic and investment conditions over a period of time. This creates period of opportunity for different classes of assets as their performance changes with economic fluctuations.
Tactical asset allocation is a diversification based on the short term (one year) return expectations.
In addition to direct ownership, your wealth may be held in different entities like IRAs or the 401(k) all of which need to be aligned give different tax implications for each. A structural analysis will allow for a thorough understanding of each entity to identify opportunities to minimize current and future taxes. Those asset classes that are expected to generate large tax liabilities should be assigned to tax-deferred accounts.
Once your wealth management plan has been fully chalked out, your financial advisor has to ensure a disciplined and focused implementation of the plan. It is also essential to review and manage your optimal strategy from time to time with changing circumstances.
A careful and focused approach from the financial advisor will help in maintaining equilibrium of risk and reward over a period of time. The information provided will help you to make informed decisions and provide convenient access to financial fitness tools leading you to improve your financial well-being.