Wealth Management

Presented by:

Aditya GadgeCEO – Association of International Wealth Managerment of India

(AIWMI)

To define the wealth management market & the services.

Provide an idea of its size and recent growth Examine the career opportunities in the wealth

management industry. Describe the competitive landscape and the ways

to reach there. Introduce CIWM Certification program as a

gateway to careers in Private Banking & Wealth Management

AIM of this lecture

Entry Test

Definition of Wealth Management & Private Banking

Wealth Management: financial services provided to wealthy clients, mainly individuals and

their families , typically with $100,000+ investable assets

Private banking: an important, more exclusive, subset of wealth management,

typically with $1 million + of investable assets.

Private banking traditionally consisted of banking services (deposit taking and payments), discretionary asset management, brokerage, limited tax advisory services and some basic concierge-type services, offered by a single designated relationship manager. On the whole, private banking relationships were mainly ‘passive’

Wealth management is broader and typically deals with managing both the assets & liabilities side of clients’ balance sheets

Wealth Management - Products

While asset management is a key feature, wealth management has a greater emphasis on financial advice and is concerned with gathering, maintaining, preserving, enhancing and transferring wealth.

Products include: Brokerage. Core banking-type products Lending products, such as margin lending, credit cards, mortgages and private

jet finance. Insurance and protection products, such as property and health insurance, life

assurance and pensions. Asset management in its broadest sense: discretionary and advisory, financial

and non-financial assets (such as real estate, commodities, wine and art), conventional, structured and alternative investments.

Advice in all shapes and forms: asset allocation, wealth structuring, tax and trusts, various types of planning (financial, inheritance, pensions, philanthropic), family-dispute arbitration – even psychotherapy to children suffering from ‘affluenza’.

A wide range of concierge-type services, including yacht broking, art storage, real estate location, and hotel, restaurant and theatre booking.

Wealth managers coordinate retail banking, estate planning, legal resources, tax and investment management .

Wealth managers can be an independent Certified Financial Planner, MBAs, Certified International Wealth Manager (CIWM), CFA Charterholders , etc.

As we understand…….

Client Segments

Private banking targets only the very wealthiest clients or high net worth individuals (HNWIs): broadly speaking, those with more than around $1 million in investable assets.

Wealth management, by contrast, targets clients with assets as low as $100,000, i.e. affluent as well as high net worth (HNW) clients.

Defining the Wealth Management Service Proposition

The following three criteria differentiate a firm as a wealth manager: The relationship that wealth managers have with their

clients, both in terms of breadth (where providers emphasise terms such as ‘holistic’, ‘comprehensive’ and ‘all-inclusive’) and depth (‘intimate’ and ‘individualised’).

The products and services provided, with a particular emphasis on estate planning and multigenerational planning services, as well as tax advisory expertise and alternative investments.

The specific objectives of wealthy clients, such as investment performance, wealth preservation or wealth transfer.

Investment Mandates

Custodian for a client’s assets. That involves, essentially, asset safekeeping, income collection, fund disbursement and associated reporting.

Execution-only mandate, the wealth manager executes, or selects brokers to execute, securities transactions on behalf of the client. Not investment advice, service aimed primarily at self-directed clients.

Advisory mandate Discretionary mandate

Discretionary Mandates

The wealth manager usually has sole authority to buy and sell assets and execute transactions for the benefit of the client, in addition to providing investment advice.

Starts off with:

Construction of a brief with the client, detailing investment aims, level of risk-aversion and other factors that will influence the portfolio (In some discretionary accounts, the wealth manager is given only limited investment authority). However, in all cases, major investment decisions, such as changing the account’s investment strategy or asset allocation guidelines, may be subject to the client’s approval.

The wealth manager is generally paid on the basis of a flat-fee arrangement linked to the value of the assets under management.

The gross revenue margin of a discretionary mandate is typically at least double that of an execution-only mandate.

Investment Mandates & Clients Wealth

The proportion of clients using advisory mandates is, in general, relatively stable across the various client wealth bands.

Execution-only mandates become more prevalent the greater the clients wealth

Discretionary mandates less prevalent, as client wealth rises. Wealth management can mean different things in different

geographic regions. In the US, wealth management is more closely allied to

transaction-driven brokerage and is typically investment-product driven.

In Europe, the term is more synonymous with traditional private banking, with its greater emphasis on advice and exclusivity.

Onshore & Offshore Wealth Management

Onshore wealth management is the provision of products and services within the client’s main country of residence.

Offshore wealth management, by contrast, serves clients wishing to manage their wealth outside their main country of residence for reasons such as: financial confidentiality; legal-system flexibility; tax considerations; the lack of appropriate products and services onshore; a low level of trust in domestic financial markets and governments; and the need for safety and geographical diversification in response to

domestic political and macroeconomic risks. Some clients treat their offshore account(s) primarily as a ‘vault’.

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Key Wealth Drivers – Regional Differences

Asia-Pacific: Strong economic development Latin America: Traditional offshore-banking

stronghold Middle East: Oil-driven growth Africa: Commodity-driven growth

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Main players

Pure private banks Trust banks Retail and universal banks Family offices Financial advisors Stockbrokers Direct banks Asset managers Investment banks Others – insurance companies, accountants, solicitors,

financial planners

The Rich & Famous

The Ubiquitous Common ManDoes he require Wealth Management

services ?

… or do they require it ?

?

Hobbies of a common man

Black Jack Golf Ice Sculpting Yachting Polo Collecting Cars

Hobbies of the rich & famous

Skydiving Flying Deep-Sea Diving Art Buying Islands Space Travel

Some more

How to grow the income more than the growth in inflation & expenses.

Major financial focus area for the common man

Preserve: How to transfer wealth to the next generation ?

Grow: How to earn tax-efficient & inflation-adjusted growth to secure the family’s financial future?

Give: What is the most efficient way for charity?

Three major financial focus area for the HNI Client

today

Highly successful families manage their wealth by working with combinations of in-house professionals and third party vendors in a “family office.”

A Single Family Office (SFO) is a private structure created to oversee personal financial matters for family members

A Multi-Family Office (MFO) is a commercial enterprise established to meet the investment, estate planning and, in some cases, the lifestyle and tax service needs of affluent families.

Family Offices

In an adminstrative family office, advisory and investment management services are managed through contracts with external service providers. The administrative family office typically directly employs staff to provide some level of bookkeeping, tax, or administrative services—often on a part-time basis.

The hybrid family office keeps functions strategic to the family’s objectives in-house, and outsources nonstrategic functions. Some families hire family members for certain strategic activities, when the family member has a demonstrated expertise or when privacy and continuity of management are top concerns. In addition to administrative functions, hybrid family offices employ experts in tax, legal and/or asset allocation.

The comprehensive family office is designed to provide services for families who desire the maximum degree of control, security, and privacy. All functions, including administrative, tax, legal, risk management, and core investment management, are provided by in-house employees. Specialized investment management activities such as hedge fund, venture capital, private equity, or emerging market investments may be sourced externally depending on each family’s objectives, budget, and their ability to recruit and retain such talent.

Types of Single Family Office

1. Altamount Capital2. Quant Capital3. Client Associates4. India Infoline Private Wealth5. Karvy Private Wealth 6. ASK Wealth Advisors7. Avendus Capital

Some of the Leading Multi-Family Offices in India

Association of International Wealth Managers

(AIWM® )

Based in Switzerland, Non-profit Association established in 2007 to promote & strengthen global education in private banking industry

Awards the CIWM® Diploma : an internationaly recognised qualification for wealth management experts

Offers private banking professionals platform for high-quality education & international networking

Association of International Wealth Managers

(AIWM)

Association founded by: AZEK , founded in 1990, the Swiss Training

Centre for Investment professionals LawInContext, online legal & training service

created by global law firm Baker & McKenzie Central Law Training(CLT), UK’s leading

provider of postgraduate legal training & course provider of renowned STEP Diploma in International Trust Management.

Currently present in Switzerland, France, United Kingdom, Germany, Italy, Luxemburg , Hong Kong & Monaco.

Recently Launched in Asia & Gulf region by AIWM India

AIWM Member Nations

Role of AIWM

Assists graduates in acquiring core competencies in wealth management & in qualifying for key positions within the industry

Established to set a globally recognised standard for the qualification of wealth management professionals

Facilitates client’s access to first-class, reliable and comprehensive advice & services.

AIWM’s Objectives

To facilitate research & high quality education in field of international wealth management

To provide internationally recognized certifications in wealth management & family office(CIWM®)

To create a forum for the interchange of ideas and information in the finance and wealth management field

To assist a world wide network of private banking experts

1. Family Office Group, USA2. NUS Business School, Singapore3. Family Office Exchange (FOX), USA4. Campden IPI, UK5. Society of Trust & Estate Practitioners

(STEP)

AIWMI – International Alliances

Conclusion

Wealth management & private banking business is currently a major area for development for many of the worlds financial firms

The market is large, growing and highly profitable Industry is fragmented & there is no agreed single

‘preferred’ model

Thank You

Association of International Wealth Management India (AIWMI)

Regus, Level 9, Platina, G Block, Plot C-59, BKC, Mumbai-51Ph: 022 67000572 Mob: +91 997017972

Email: aditya@aiwmindia.com www.aiwmindia.com

Queries