Top 4 Wealth Management Mistakes to Avoid Whether you own multiple sprawling bungalows or live in a modest two-bhk flat, managing your personal and family wealth must top your list of to do things. Though a new concept in India, private wealth management as a practice has many takers in the country. Over the years, wealth management industry in India has diversified. Today professional wealth managers offer different packages for their corporate clients and individual customers to help manage family wealth in India. To meet the specific needs of their clients, wealth managers also come up with customized private wealth management strategies. Before you start working on your wealth management strategy, you must be aware of the pitfalls. Given the fact that your hard earned money is at stake, it pays to be extra cautious and avoid unnecessary risks. To help, the post lists some wealth management mistakes to avoid. Take a look.
1. Not Having a Clarity of Objectives Many wealth management plans are a result of short term gains or a reaction to sudden opportunities such as a lottery winning or a property inheritance. In many cases, assets are allocated and reallocated without giving a second thought. Many families either reallocate assets too frequently or do not change their strategy even after long periods. An unplanned wealth management strategy can do more bad than good. It is, therefore, advisable that you determine your wealth management goals and objectives and consider a number of factors such as a change in government policies or a change in your income when revamping your strategy. 2. Not Communicating With the Stakeholders Proper communication with all the stakeholders involved, including your family members and the wealth manager is a must to ensure success. Inform your family members about how the assets are allocated and the way the funds are monitored. To avoid information overkill, when explaining them the allocation, use a simple language. Instruct your manager to maintain confidentiality regarding family wealth and fund allocations. 3. Avoiding Estate Planning Life is uncertain, which is why we need to prepare for the future in advance. Cases of infighting among family members over sharing of assets after the death of the family’s head are common. It is, therefore, advisable that individuals design and execute an estate or succession plan on time, announcing an executor and a list of successors. They must also write a will that elaborates the succession rights of each family member.
4. Not Seeking Expert Help Many individuals or those with small businesses often bypass the need of hiring a professional wealth manager and consider their financial affairs to be too simple to be professionally managed. However, they fail to account for the importance of external factors that can impact their investments. Managing wealth is an expert task; there are many complexities involved, many of which are understood in their entirety just by professionals. Though hiring a professional may cost you a bit more, every rupee is worth the investment as the manager can help you with asset allocation and keep a track of their performance. Conclusion There are two broad objectives of a wealth management plan: to help avoid losses that arise due to market risks, and wealth consolidation. Wealth management is a long term strategy and you must not let short term speculative gains lure you, as they carry increased risks due to volatile market forces involved. If, however, you plan to cash in on such short term benefits, set aside a fund for the purpose.