5 Reasons wealth management is important in today’s world
“One must be deeply aware of the impermanence of the world.” ~ Dogen Zenji, Japanese Buddhist priest, writer, poet and philosopher.
Today’s world is changing at a rapid speed in terms of technological advancement, intellectual awareness, global weather, financial evolution, and in many other areas of life. Accompanying these are curveballs in the form of black swan events such as the recent COVID-19 pandemic and Brexit, which can have a sudden and damaging impact on one’s investment portfolio.
Such unpredictability makes wealth management ever more pertinent. However, many individuals try to manage their finances and assets without any external professional help. While one can save a lot of money by relying on conventional methods, it takes skill to create, preserve and grow wealth efficiently. In this article, we discuss in detail why it is important to begin managing one’s wealth professionally as soon as it is possible.
What is wealth management?
It is the consultative process of meeting the financial wants and needs of individuals by giving them specific services and products. Wealth management requires a team of highly skilled professionals, namely a wealth manager, investment management advisors and other professionals.
It is important to note that wealth management is more than just investment management. While the latter mainly pertains to selecting the right stocks, bonds and funds to invest in, wealth management is a more comprehensive approach.
It extends to retirement planning and building an investment profile according to one’s status and objectives in life. Often, the proposed investments extend beyond traditional vehicles and venture into the many options available in the alternative landscape.
Reason 1: Preparedness for any crisis
The Covid-19 pandemic is the biggest crisis in the year 2020 that is close to the hearts of many worldwide. It not only cost the loss of lives but also massive economic and financial losses across all levels of society. Moreover, such unprecedented events have occurred in the past, and are not limited to diseases.
As a global citizen with vested interest in global economies, the crash of an economic sector in another part of the world can hit one’s investment portfolio hard if there is a concentration in that sector.
What is flourishing today may suddenly be upturned by incidents like the pandemic, war, political upheaval, social unrest and natural disasters, such as month-long wildfires and earthquakes.
Having a balanced investment portfolio and well thought out strategies can help to protect one’s wealth. One of the key strategies of wealth management is to create a portfolio which does not put all the eggs in one basket, complemented with strategies to soften the impact of unforeseen disruptions.
Sadly, many choose to reach out for professional financial guidance after a significant life event including personal events like a family illness or death, divorce or inheritance. This reactive approach is less effective than a precautionary approach.
Engaging the help of a wealth advisor before a crisis hits ensures that you are already aware of your full financial picture. This offers you more options to move forward with greater agility.
Reason 2: Broader view of opportunities
Many high-net-worth individuals have high financial awareness and savviness. However, the growth and evolution of investment vehicles can outpace one easily, spurred by advancement of technology and changing global trends.
Algorithmic trading and robo-trading are amongst the newest technologies which have changed the way funds are traded. These are just two examples of Fintech affecting the world of investing.
New industries of the future are being created and coming into their own as we speak. What used to be just a CPU-sized server for storing digital data has now evolved into a million-dollar industry of its own called big data. All around the world, entrepreneurs and startup companies are creating game-changing digital applications for mobiles, computers, drones and robots.
Wealth managers are trained to find value beyond traditional markets. Having the help of a dedicated expert could pay fantastic dividends when such new value investment opportunities are discovered.
The right wealth manager can help you to take on a brand new alternative product which could fill your portfolio with appreciating assets.
Reason 3: Minimized taxes
A Marvel hero would hear “With great power comes great responsibility.” But a HNW person knows “With great wealth comes great taxes.”
It isn’t easy for millions and billions of income to escape tax bills, especially not from a well regulated and efficient government, no matter how attractive the tax rates are.
An effective wealth management approach does not simply entail finding value investments, it is also focused on putting together the right structure to house your investments and to keep unnecessary expenditure low. This makes tax planning a pivotal part of wealth preservation.
An experienced wealth manager can help you navigate all tax related matters, bring down your tax spending as well as benefit from all the possible tax incentives from your local government and the jurisdictions of where your foreign assets are situated.
Reason 4: Optimised time usage
The management of investments can be an extremely time-consuming activity for those who seek to maximise their earnings and do it all by themselves without professional help. It involves following the markets, studying financial reports and analysing economic data – all of which can be too demanding to stay abreast while also handling one’s own day job and personal affairs.
Seeing how global catastrophes can unravel rapidly, one must constantly be monitoring various data sources including news and various economic indicators to make an informed decision on the necessity to adjust and rebalance their investment portfolio to better prepare for the change in the investment climate. That simply doesn’t leave enough hours in the day to commit to their work, families and friends all while maintaining an eagle-eye focus on their investment growth.
Or perhaps you have reached a stage in life where your priorities have changed to spending more time with your children, grandchildren or senior members of your family. When this happens, time becomes very precious. Wealth managers are meant to free up your time by doing all that time-consuming work on your behalf.
Reason 5: Fluency in financial knowledge
New types of funds and investment vehicles are constantly emerging in Singapore and abroad. For example, crypto-currency, algorithmic trading, tokenized digital assets which fall under the alternative investment asset class. The Salzworth Global Currency Fund is one such alternative fund where its focus is on FX spot trading in G10 currencies.
A professional wealth manager can offer to educate clients, and help them understand the intricacies of such financial instruments and how exactly it can contribute to the growth and diversification of one’s investment portfolio. It is important to know where your money is going and the risks associated with the product and the investment strategies your wealth manager is undertaking.
What does a wealth manager do?
A wealth manager is a type of financial advisor who uses a spectrum of financial disciplines available, such as financial and investment advice, legal or estate planning, accounting and tax services as well as retirement planning to manage an affluent client’s wealth for a fee.
Wealth managers create personalised approaches to tailor-fit portfolios for their clients. This effort can involve collaborating with your accountants and lawyers to plan your financial outflows, such as taxation and insurance requirements. They can also propose protective insurance policies to shield clients from potential risks.
Is it worth having a wealth manager?
You should consider a wealth manager if you have a high net worth and want comprehensive management of your finances. Some wealth management firms require a minimum of S$30 million or even more just to open an account. The fees for service alone can go up to S$1 million. However, the capital gains and tax savings from this service can be double or triple this fee.
Types of wealth management service providers
1. Asset management firms
These either specialise in investment advisory and products only, or they extend their service to wealth management as well, including bespoke services.
2. Boutique advisory firms
These are known to provide customized financial solutions to clients who are mostly ultra-HNWI and HNWI.
Some banks have a larger investment distribution model and some even offer Family Office type of services which focus on wealth management.
4. Brokerage Firms
These only focus on investing the customer’s money in shares and IPO which are equity market products.
The size of wealth management in Singapore has been growing steadily. Survey findings by the Monetary Authority of Singapore show the total value of Assets Under Management has increased year-on-year from 2013 to 2018. The compounded annual growth rate was at an impressive 14%, with a value of S$3.4 trillion as of the end of 2018.
Attributed to this growth are supportive government policies, attractive incentives, Singapore’s developed capital market and infrastructure, sound financial regulation as well as its political-economical stability.
Lastly and most importantly, it is due to the full suite of wealth management services and world-class professionals available in the country. Professional wealth managers in Singapore offer a holistic and personalised approach to grow and protect client wealth.
Co-Founder, Chief Executive Officer
Haruhito was the Executive Director of Marcuard Heritage Singapore Pte Ltd, a Swiss multi family office. He was instrumental in building up their European and Asian clientele base which comprised of a global network of asset managers, distribution partners, and legal & tax specialists. Prior to that, he held various positions for 10 years in Deutsche Bank where he gained extensive experience in various Asian markets.
Haruhito has been accredited as a Trust and Estate Practitioner (TEP) by STEP, and as a Financial Industry Certified Professional (FICP) by Singapore’s Institute of Banking and Finance. His vision for Salzworth is to steer it to establish multi-asset class portfolios and funds that seek to achieve steady returns for investors.