28-1 overview of private wealth management
1 introduction
2 private clients
versus
institutional clients
3 understandign
private clients
information
needed in
advising
private
clients
client goals
private client
risk tolerance
technical and
soft skills for
wealth managers
investment
objectives
constraints
other
distinctions
private wealth management:
investment management and
financial planning for
individual investors
diverse broadly defined /
specific clearly difined
private: shorter time horizons, less scale and more significant tax considerations /
behavioral issues more porminet /
formal governance structure greater level investment sophistication
private: financial security after retirement / financial support to family / philanthropic goals
private: often compete with one another and may change over time
institutional: clearly defined, typically related to specific liability stream
private: unique constraints
regulation
uniqueness and complexity
personal
infor
financial
infor
private client tax
considerations
family situation
emplyment and career
sources of wealth
explicit return objective
investment preferences
detailed discussion of financial
objectives and risk tolerance
personal balance sheet
provided may not be comprehensive
→ need to analyze and synthesize
sources of cash flows
common tax categories:
taxes on income // wealth-based taxes // taxes on consumption/spending
basic tax strategies:
tax avoidance // tax reduction // tax deferral
planned
goals:
retirement
specific purchases
education
family events
wealth transfer
philanthropy
unplanned
goals
property repairs
medical expenses
other unforeseen spending
the wealth
manager's
role
goal quantification
goall prioritization
goal changes
key terms
risk tolerance - level of risk willing and able to bear
risk aversion - degree of unwillingness to take risk
risk capacity - ability to accept financial risk
determined by wealth / income / invest time horizon / liquidity needs / other relevant factors
risk perception: assessment of risk involved in the outcome of investmetn decision → depend on the circumstances involved
risk tolerance
questionnaire
not perfect and unclear predictive of behavior
high degredd of subjectivity
how the structuring affect responses
risk tolerance
conversation
enable manager to educate client
about investment risk
risk tolerance with
multiple goals
to address potentially conflicting
risk tolerance levels
technical skills
require min
qualification
capital markets proficiency
a broad understanding of capitial markets
and asset classes
portfolio construction ability
deep understanding of risk and return, correlations
knowledge of vehicles / strategies for implementing
financial planning knowledge
estate law / taxation / insurance
quantitative skills
technology skills
language fluency
soft skills
interpersonal
relationships
communicaiton skills
social skills
education and coaching skills
business development adn sales skills
*reasonably estimated or quantified within an expected time horizon
*unforeseen financial needs
*relevant considerations in goal creation