42 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s While 2020 and 2021 may have been a time for wealth accumulation, today’s focus is on wealth preservation. What are the most common misconceptions that wealth owners have about wealth management? 1. High net worth individuals and the market need fewer asset management experts Research shows that high net worth individuals think about services quite differently than one might initially assume. For example, common sense and market logic would dictate that the number of wealth management professionals should decline during a crisis. A lower number of wealth management professionals are needed when overall wealth drops. On the contrary, research shows that demand tends to move toward asset management firms precisely because a more crisis-resistant portfolio needs to be built. Only assets managed by several firms with different strategies can be more crisis-resilient than a diversified portfolio. 2. Investing in Fortune 500 firms equals a balanced portfolio Over the last ten years, many investors have depended only on the trendiest stock exchange companies. However, this strategy is only viable until there is a bull market (trending upward). Those who have followed this strategy may now realise that it makes sense to diversify much more broadly because the negative trend affects not just one sector but the entire stock market, almost without exception. Instead of focusing on high-profile growth businesses, you may diversify your portfolio by investing in value stocks and stocks with varyingmarket capitalisation to gain exposure to many industries. Furthermore, investing in an exchange-traded fund allows you to diversify and actively manage your assets without having to hire a financial manager. 3. Wealth management services that are prohibitively pricey Many consumers misperception that this service is pricey due mainly to comparisons with typical bank costs. Private banking, asset management, and fiduciary services are more expensive than standard bank rates. However, they also offer considerably more significant potential for value generation. A professionally managed portfolio has a markedly better chance of generating significant returns in the short and long term. 4. Larger service providers offer better solutions in wealth management Although many people believe that larger companies provide a higher level of service, and it may be true, this is an issue that should be considered from the perspective of individual preferences. While small boutique agencies probably serve fewer clients than the market-leading large firms, they are also likely to devote more attention to individual clients. And it’s not difficult to bring in additional staff to assist when needed. With a larger asset management firm, the benefits of decades of experience, a high-quality track record, or standardised processes are more likely to be reasons to choose. Inaddition, larger institutions may not cater to customers with less than £5 million in investable assets or may only give restricted services to such clients. What are the best practices in auditing a client’s needs? In this rapidly changing environment, wealth management firms are doing everything they can to understand the needs of their clients comprehensively and to maintain and increase the assets under management. To do this, they apply the following best practices: • Close personal contact: Although research shows that the quality of the personal relationship is no longer the main criterion for all clients when choosing a wealth management firm, the quality of the service is significantly improved by building a close relationship. During difficult times, the contact person can stay in touch with the client through different channels (face- “While 2020 and 2021 may have been a time for wealth accumulation, today’s focus is on wealth preservation.”
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