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Adrian Mastracci, portfolio manager at KCM Wealth Management, says “Wealth management looks at everything that affects the finances. Tailoring the portfolio to match personal goals is the prime one." |
For Immediate Release
Vancouver, BC (September 26, 2006): Investors work, save and invest to achieve their goals. But how conversant are they with the real meaning of wealth management?
I’m reminded of the song “Follow the Yellow Brick Road” from the classic 1939 children’s movie Wizard of Oz. A timeless line of which goes, “Becoz of the wonderful things he does”. Our oldest must have watched it at least 200 times.
Adrian Mastracci, portfolio manager with Vancouver based KCM Wealth Management, comments, “Investors may face a host of roads. Not all of them yellow. The lack of time is a frequent grumble when it comes to managing personal wealth. It also requires extensive expertise in a variety of areas.”
Investors try hard, but many don’t go far enough. It’s quite easy to become wrapped up in investing their assets. Often, the other important stuff does not get the attention it deserves.
Defining the road
I see the road to wealth management as a process. It harmonizes all the finances with the handling of the portfolio. Typically, it spans from age 30 to 90. Hence, it’s truly a long-term assignment.
In my practice, the goal is to coordinate the portfolio with five areas. Risk management, retirement aspirations, estate planning, income tax and business planning are the key ones.
Wealth management looks at everything that affects the finances. Tailoring the portfolio to match personal goals is the prime one.
It requires complete understanding of the client’s specific financial situation. It provides customized solutions to current and future needs. It’s a comprehensive and coordinated approach.
While it includes managing the invested assets, it's more than that. It means appreciating where clients are in their lives. Where they want to go. What it takes to achieve personal objectives.
Extensive knowledge, insight and expertise are essential to skillfully weave the finances. It means anticipating what clients need. Sometimes before they may be aware of it.
Investors ought to evaluate all their wealth management issues before tackling them. A team of advisors may be required. Then pick the appropriate starting points.
What’s involved
Following the yellow brick road of wealth management is easy. It consists of synchronizing the finances within six integrated components. Each one has a life of its own.
Here is my summary:
1. Risk Management – Managing risk continues to be top priority of successful wealth management. Investors have a variety of requirements for both preserving and growing capital. Today, a high proportion of total assets is invested in securities. Practically everyone is facing increased market volatility. The wise solutions focus on three vital issues: ability, willingness and need to incur investment risks. Managing risk never stops during the investing lifetime.
2. Retirement Planning – Achieving successful retirement is a goal for many. In addition to managing retirement assets, it determines if sufficient assets are available to fund retirement. Establishing the investment returns required to accumulate the portfolio, maintain lifestyle and meet retirement income needs is an important analysis. Investors also need to be forthcoming about changes in their lives, concerns, and dreams.
3. Portfolio Management – Portfolio management is the core service sought by most investors. It’s the process of managing financial assets like stocks, mutual funds, bonds, cash and real estate. It seeks to achieve a specific goal, like retirement. Disciplined investing concentrates on policies and strategies before the tactics. The process includes the assessment of risk tolerances, lifestyle requirements, wealth preservation desires and time horizons. A prudent asset allocation is then designed and put into action. Broad diversification and quality investments are part of the plan.
4. Estate Planning – Estate planning covers how wealth is transferred at death to family and others. It also deals with a variety of additional personal matters. The core document associated with this process is a valid will. Integrating the estate plan with the other wealth management components helps develop the right plan and minimize estate taxes. Tax friendly strategies while living may transfer wealth to family with lower tax liability and provide for future generations. Managing an inheritance is also important for many.
5. Tax Planning – Income tax planning tries to minimize and defer income taxes payable. Pay close attention to the tax friendliness of the game plan. Never put tax strategies ahead of investment merits. Keep it simple whenever possible. Many may have strong desires to benefit favourite charities and educational institutions. They want to make a difference. Creating a charitable foundation, or funding a trust to benefit the alma mater are noble objectives.
6. Business Planning – The economy has created significant wealth for many entrepreneurs and executives. Specialized services address the crossing points between the owner and business, acquiring a stake in the business and organizing the business plan. Also, reducing the risks of having too much wealth in a single stock, cross-border issues and business succession issues.
Discover the magic. Investors can first decide where they’re going, then wealth management strategies assist them in getting there.
Begin slowly, but with a comprehensive plan. A simple approach that points to the road ahead. A journey that may easily last five or six decades.
The movie has become a classic. So is the yellow brick road to wealth management. It’s always worth taking. At any time.
I welcome your questions, comments and opinions.
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