Wealth management refers to the investment in the stock market, real estate, bonds and other financial instruments with the objective of creating more wealth. Wealth management or wealth advisory is provided by a large number of financial advisory firms that specialize in wealth management and wealth building for corporations, wealthy individual families and other individuals. They provide such services as investment management, asset protection and estate planning. The term “wealth” has a variety of meanings. For the purpose of this discussion, we will concentrate on the most common meaning of the word, which is wealth in its economic sense.
The goal of every manager is to create an overall return on his or her portfolio. The size of a person’s net worth is the value of all assets minus their liabilities – for example, if a person owns a house, it means that they have equity in that house. All managers aim to create a portfolio of stocks that will earn a high enough return to allow them to live comfortably. To achieve their goals, financial advisors often take on large amounts of debt and use sophisticated financial strategies and investments to increase the value of their portfolios. Most wealthy individuals are able to pay off their mortgages, but they also spend quite a bit of money on other aspects of their lifestyle, such as art and travel. Even if a person does not have any investments, they can still manage their finances effectively.
The term wealth management generally refers to financial planning and investing that has a long-term perspective. The goal of the manager is to build their portfolio so that they eventually have access to sufficient cash reserves to live comfortably, without having to rely on loans from family or friends. An effective portfolio management system includes careful analysis of current investments, asset prices, interest rates, inflation and tax considerations. Many wealthy individuals choose to avoid the use of financial planning agencies and invest their own money, but they often hire financial planning advisors who can help them achieve their goals. Financial planning can help individuals achieve a comfortable retirement age, build an investment portfolio that grows at a rate that allows them to generate cash flow from their investments, and use the funds to live comfortably once they have retired.