This report covers several topic areas in wealth management such as what it seeks to achieve, how a wealth management firm is authorised, who may use this service, the alternative options for a client and the macro-economic environment and legislative influences.
Wealth management is a practice that best describes the combination of personal investment management, finance advice, and financial planning for the benefit of high-net-worth clients. Robert J. McCann, former President of Global Wealth Management at Merrill Lynch was quoted describing wealth management addressing “every aspect of a client’s financial life in a consultative and highly individualised manner. “ (Financial Times Lexicon, 2014, Online)
Wealth management seeks to help grow a client’s investment portfolio size, provide an income from the portfolio, do a mixture of the two or it can seek to preserve a portfolio. Wealth management seeks to achieve these objectives using a number of different strategies based on the client’s personal or professional objectives. The services are unique to each client and personalised to meet the clients’ objectives. The aim of wealth management is not only to provide investment advice but to cater for the clients’ financial life. This is achievable through management, advice and planning around the clients objectives.
Authorisation & Remuneration
As a private bank, the regulatory authorisation is required. Authorisation must be gained by the Financial Conduct Authority (FCA) to conduct any regulated activity. Promoting, selling, managing and advising on investments are regulated activities, which means firms involved must be authorised by the FCA. The FCA also ensures that many investment products and schemes are set up to meet the needs of investors. Global Bank as a private bank has direct authorisation to conduct regulated business and its individuals are approved persons performing controlled functions. Under the FCA’s Handbook, firms dealing with client money and custody assets must comply with the Client Asset Sourcebook (CASS). Carrying out regulated activities without authorisation may be a criminal offence. If a firm does not comply with the regulatory body it can receive a fine. (FCA, 2014, Online)
The cost of wealth management advice differs from firm to firm. Often a percentage of the overall portfolio is charged, for example in a portfolio of £100,000 - £500,000 a manager may charger 3%, £500,000.01 to £1m 2% may be charger and over £1m only 1%. This is known as the annual management charge. However, a fee for the advice will also be charged. This can be at an hourly rate, a set fee, a monthly retainer or a percentage of the investment. (FCA, 2014, Online)
Mass affluent refers to those individuals with at least £100,000 in liquid assets. Booz&co’s (2013) research on the demographic opportunity for wealth management in the U.K stated that 12.1% of U.K. households fall in the...