10 common misconceptions about wealth management
Ten misconceptions about wealth management outlined here aim to help you understand the concept better. Instead of thinking about wealth management as a service reserved for the elite and wealthy, you should view it as an essential guiding light in helping build, grow, and preserve your wealth corpus.
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Various banks and NBFCs in India have started offering wealth management services. However, most people are still on the fence about wealth management primarily due to the various misconceptions and myths surrounding the concept. These misconceptions often discourage people from seeking professional help, resulting in missed opportunities. This article outlines the 10 most common misconceptions associated with wealth management to help bring out the truth about this critical aspect of financial planning.
Ten common wealth management misconceptions people harbour
1. Wealth management is only for the ultra-rich
Contrary to popular belief, wealth management services are not solely available to the ultra-wealthy. In fact, wealth management services are oriented to support people across income thresholds to grow their assets. Whether you are a young professional seeking investment guidance or a successful business owner looking for succession planning, wealth managers can render customised services based on your needs.
2. Wealth management is the same as investment management
Many people tend to use the terms wealth management and investment management interchangeably. While investment management is a component of wealth management, both are not unanimous. Investment management entails managing investments to help them grow, while wealth management takes a broader approach to encompass everything from financial planning and risk management to estate planning and tax planning.
3. You need to have a large portfolio to benefit from wealth management
Another common misconception about wealth management revolves around the right portfolio size. Most people believe that they require a sizable portfolio to benefit from wealth management services. In reality, wealth management services are adaptable and scalable. Drafting a well-structured plan is more important than simply the size of your portfolio.
4. It is expensive too expensive to hire a wealth manager
Many people believe that wealth management services are extremely expensive and solely reserved for the ultra-rich. Wealth management fee structures tend to vary from one firm to the next. While some use a flat fee model, others may charge fees on a percentage basis. Moreover, the cost of such services generally gets outweighed by the value generated by a wealth management expert in terms of financial planning, risk management, and investment growth.
5. A DIY approach works best
Individuals often believe that they can manage their wealth on their own without any professional guidance or aid. While this may be true for some, most require help to navigate through financial complexities and risks. A DIY approach can not just be time consuming, but it can also expose you to risks like misallocating assets, missing out on tax efficiencies, and overlooking important insurance needs. Proper wealth management also requires cross-disciplinary expertise including knowledge of tax laws, inheritance and estate laws, and markets, which you may not possess.
6. Only older people need wealth management
The idea that wealth management is reserved for older people is flawed. Wealth management is indeed a critical part of financial planning, regardless of your age and life stage. Young professionals can use wealth advisors to tackle student loans and plan investments, while those nearing retirement can optimise retirement planning and tax-savings with wealth management guidance.
7. A cookie-cutter approach works for wealth management
The wealth management strategies implemented by a friend or colleague may not work for you simply because your goals and needs are different. Most people also assume that wealth managers have set plans they use for every client. On the contrary, wealth managers assess your financial goals, risk appetite, current financial standing, and other parameters to draft a personalised management plan that aligns with these subjective factors.
8. Wealth management is a one-time activity
Many people also believe in the myth that once a wealth management plan is ideated, there’s nothing more to be done. However, this is a common misconception because wealth management is a dynamic affair. Your wealth management plan needs to be reviewed and revised in keeping with market changes, major life events, and changes in your goals.
9. Quick returns are guaranteed with wealth management
Wealth management is focused on long-term financial objectives, rather than short-term gains. Therefore, wealth management is geared towards achieving stable and sustainable progress through informed decision-making. In other words, quick returns are not guaranteed with wealth management.
10. Wealth management is just about investing your money
Rather, wealth management is about taking a holistic approach to consider the entire financial picture. This means you must assess every aspect of your financial life - be it expenditures, debts, investments, retirement planning, taxes, or insurance. It is about creating long-term tailored strategies that go beyond immediate investments.
Conclusion
The ten misconceptions about wealth management outlined above aim to help you understand the concept better. Instead of thinking about wealth management as a service reserved for the elite and wealthy, you should view it as an essential guiding light in helping build, grow, and preserve your wealth corpus. If you wish to navigate the financial landscape with confidence, you can check out various types of wealth management services available on online marketplaces and make an informed choice.
(This article is part of IndiaDotCom Pvt Ltd’s Consumer Connect Initiative, a paid publication programme. IDPL claims no editorial involvement and assumes no responsibility, liability or claims for any errors or omissions in the content of the article.)
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