March 14, 2022
Posted by: Virg Cristobal
Category: Uncategorized

What is Wealth Management?

Wealth management is different from financial planning. Everyone should utilize financial planning on some scale, regardless of earning potential or net worth. Wealth management, however, is reserved for those who have a surplus of wealth.

Those who have assets or cash beyond what they will use to support their lifestyle and future retirement or care need a wealth management strategy, to maintain or grow their wealth. If you are financially independent and unsure of how to best utilize the surplus, a wealth management strategy is essential for you.

Depending on the temperament and risk tolerance of the individual, one may prefer any of these three approaches to wealth management.

Conservative Wealth Management

Conservative or often called Phlegmatic wealth management is a cautious, conservative approach that is best suited for someone who is risk-averse. In this type of wealth management strategy, the goal is to maintain assets rather than focus on growing them. Those who are content with their net worth and simply want to protect it without taking big risks are the right fit for this approach.

A typical wealth ratio allocation in a conservative wealth management approach is 70% or more in debt and real estate investments, with the remaining amount in equity funds.

Aggressive Wealth Management

This approach to wealth management is much more aggressive, best for those with a high risk tolerance. Though unlikely, this strategy has a worst case scenario of losing most or all of the surplus. Of course, higher risk offers the potential of higher reward.

You may be the right fit for this approach if you are willing to risk losing your entire surplus, and enjoy the excitement of volatile investments. If you are a go-getter who likes to push limits and is willing to risk starting over, this strategy may be right for you.

In a choleric wealth management strategy, a wealth manager would typically use the following wealth ratio allocation: 70% or more in equity funds, with the remainder in debt funds or real estate.

Hybrid Wealth Management

If neither of the above wealth management approaches resonates with you, a hybrid approach may be the better choice. As you probably assume, the hybrid wealth management approach combines both aggressive and conservative ideas to find a happy medium.

In this approach, a typical wealth ratio allocation would be 40%-60% in equity funds, with the rest in debt funds or real estate.

Next Steps

To determine the best wealth management plan for your individual needs and temperament, there are a few steps we suggest taking. Begin with a wealth assessment, where a wealth manager will review your assets to determine your total surplus wealth.

The next step in developing a wealth management strategy is determining your risk tolerance. Factors that come into play when determining your risk tolerance go beyond your personality; also consider your age, children for whom you may want to leave a legacy, and comfort level with losing significant assets.

After completing a wealth assessment and a risk tolerance assessment, your wealth manager will work with you to determine your ideal wealth ratio allocation. This ratio is determined by deciding what percentage of surplus wealth you are comfortable risking.

For example, if you are willing to risk losing up to 40% of your surplus wealth, a 60:40, with 60% of his wealth in low-risk investments at all times. The 40% in this example is the portion of the wealth for which an individual needs expert health. To invest with the highest rate of success, work with an experienced wealth manager.

To begin pursuing wealth management, contact us today. With the right team of experts, you can have confidence that your assets are being managed appropriately for the wealth management goals that suit your temperament and goals.

Financial planning can be done at any stage in life but the sooner the better. For more information on financial planning, contact Chrome Advisors today.

1-415-818-9005