Executive Summary

Wealth Management provides various investment opportunities to its clients in the way of Asset Allocation into - Commodity - Equity - Debt - Insurance Property The Project also shows the Report Analysis on Wealth Management across the Globe by The BCG (Boston Consulting Group). Which highlights on various Wealth Management activities and its effects on the World Economy

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Wealth Management
Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services. High Net worth Individuals (HNWIs), small business owners and families who desire the assistance of a credentialed financial advisory specialist call upon wealth managers to coordinate retail banking, estate planning, legal resources, tax professionals and investment management. Wealth managers can be an independent Certified Financial Planner, MBAs, Chartered Strategic Wealth Professional, CFA Charter holders or any credentialed professional money manager who works to enhance the income, growth and tax favored treatment of long-term investors. Wealth management is often referred to as a highlevel form of private banking for the especially affluent. One must already have accumulated a significant amount of wealth for wealth management strategies to be effective

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Portfolio
The term portfolio refers to any collection of financial assets such as stocks, bonds, and cash. Portfolios may be held by individual investors and/or managed by financial professionals, hedge funds, banks and other financial institutions. It is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives. The monetary value of each asset may influence the risk/reward ratio of the portfolio and is referred to as the asset allocation of the portfolio. When determining a proper asset allocation one aims at maximizing the expected return and minimizing the risk. This is an example of a multiobjective optimization problem: more "efficient solutions" are available and the preferred solution must be selected by considering a tradeoff between risk and return. In particular, a portfolio A is dominated by another portfolio A' if A' has a greater expected gain and a lesser risk than A. If no portfolio dominates A, A is a Pareto-optimal portfolio. The set of Paretooptimal returns and risks is called the Pareto Efficient Frontier for the Markowitz Portfolio selection problem.

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What is Portfolio Construction?

Custom Portfolio Construction is selection of assets and products based on client needs and circumstances.

This involves Client Risk Assessment Client Need analysis Asset Allocation (Depending on Economic & Sectoral outlook) Product Selection (Based on Qualitative and Quantitative performance analysis)

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Portfolio Construction Methodology

Risk Profile of the client would be based on a set of questions & a automated scoring model Asset Allocation will be determined at Strategic level (using Qualitative information & Efficient frontier) Tactical Allocation will be done for future expectations of TCL research view. This would be an adjustment to strategic asset allocation (Frequency for adjustment would be min 3 months) On the discretion of client, end to end financial planning will be done & the same would be adjusted in asset allocation.

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Portfolio Construction - Methodology

Client Portfolio

Personalized Asset Allocation

Risk Profiling

Asset Allocation

Products Recommendation

Client Level Understanding of 1. Risk Tolerance Levels 2. Specific Needs & Client Circumstances 3. Likes & Dislikes

Strategic Asset Allocation based on Client profile and Quantitative data analysis Tactical Asset allocation based on research expectation

Research on wide range on products selected from each asset class Product Suitability analysis based on Client Profile Asset/product level exposure limits

Supported by
Financial Planning Risk Profiling Quantitative Data Analysis Macro Economic Research Asset Class Research Sector Research Stock Research MF Research Alternative Investments research

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What is Asset Allocation?

Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame

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Asset Allocation Model

Asset Classes Identified on the basis of differences in Risk Return Characteristic. Allocation will be done on the basis of Risk Tolerance Sub-Asset Class Allocation Based on Number of Sub Asset within the main Asset Class

Allocation to be based on
Standard Deviation/ Downside deviation & Risk Tolerance Levels Liquidity Needs (For the entire portfolio as well as for the asset class) Diversification or Concentration (Sub Asset) requirements. Min. or Max exposure to a security. Specific exclusion of assets by the client

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Asset Allocation Output

Asset Allocations Mean Return Expected on Model portfolio V/s Current Returns on Assets Portfolio Risk Standard Deviation, Downside Deviation Monti Carlo Simulation of Portfolio Values Worse Case Scenario Financial Goals Probability of Achievement (If Goals are not Specified, various portfolio values with probabilities) Asset Allocation Reshuffling of Current Allocation Criteria Transaction Cost & Tax on sale V/s Relative expected gain Future cash flow investment Liquidity needs V/s Implied Liquidity Acceptable Downside Risk V/s Implied Portfolio Risk

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Strategic Asset Allocation Asset Class

Product Type Equity MF - Equity Private Equity Int. Equity MF - Debt GOI Bonds REC/ Other Bonds Capital Guaranteed Products Gold Silver REITs Real Estate MFs Real Estate Crude Agricultural Commodities Metals Art Hedge Funds Asset Class Classification Equity Equity Equity Int. Equity Debt Debt Debt Debt Bullion Bullion Real Estate Real Estate Real Estate Commodities Commodities Commodities Alternative Investments Alternative Investments

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Case Study
Edelweiss Financial Services
A prospective client approached Wealth Management Group seeking investment advisory for self and family; the assets he offered as security were multipart in nature. The Situation - Assets holding were manifold difficult to consolidate Beneath the inherent requirement of Investment Advisory on diverse asset classes, our interactions revealed the need for consolidation of Family and Office wealth. Since business was family run many assets were held under various companies. Our Advice - Regularize holdings and assign worth Our first advice was to regularize all the holdings and assign them as per needs and requirements. Since there were business partners from same family we recommended delinking and de-risking personal and business investments. Once this was established a need for creation and securitization of wealth for long term goals was advised in addition to just a pure investment advisory.

What Changed - Establishing a new relationship Impressed at the financial understanding we had demonstrated and appreciative of the holistic measure taken to restructure the entire family office investment with a proposal for securitization of long term goals, the prospect decided to accept our recommendation and became a client.

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Conclusion
Wealth managers are beginning to investigate innovative segmentation methods to manage the changing client profile. Over the next 20 years wealth managers will hone their segmentation methods. Wealth managers will develop segmentation as a servicee f f i c i e n c y i n i t i a t i v e . S e g me n t a t i o n mo d e l s wi l l a p p l y h o l i s t i c c r i t e r i a t o W management. The most important segments globally will be entrepreneurs and SMES/CEOs. Financial advisers will become an important separate client segment for wealth managers The organization of direct client ownership will also change Availabilitya n d f l e x i b i l i t y w i l l b e c o m e v i t a l c o m p o n e n t s o f t h e b u s i n e s s m o d e l I n t e r n a l r e s t r u c t u r i n g wi l l a i m t o i n t e g r a t e c l i e n t s e r v i c e s . Th e r i s e o f t h e ma s s a f f l u e n t represents an opportunity for wealth managers in the medium term Wealth managers will capture the higher value mass affluent market by offering a scaled down wealth ma n a g e me n t s e r v i c e . Th e ma s s a f f l u e n t p r o p o s i ti o n wi l l r u n a l o n g t h e l i n e s o f t h e current wealth management service. Liability management is currently not part of the wealth management agenda but has proven potential. Clients in developed markets are seeking more holistic wealth management services Liability management is clearly a profitable area with a proven existing client base. The incorporation of lending into wealth management will shift the focus of the service. Specialist forms of lending will also become common additions to the offerings of many wealth managers. Some willf a i l d u e t o a p e r s i s t e n c e o f t h e a s s e t f o c u s e d s e r v i c e m o d e l a n d a l a c k o f commitment. There are significant benefits in the area of liability management for thew e a l t h y , a n d t h a t t h e i m p o r t a n c e o f l i a b i l i t y m a n a g e m e n t a s p a r t o f w e a l t h ma n a g e me n t wi l l i n e v i t a b l y g r o w o v e r t h e n e x t 2 0 ye a r s , u n t i l i t b e c o me s a k e ys e r v i c e a r e a . R i s i n g i n c o m e a n d w e a l t h i n e q u a l i t i e s , i f n o t m a t c h e d b y a corresponding rise of incomes across the nation, can lead to social unrest. An area of great concern is the level of ostentatious expenditure on weddings and other family events. Such vulgarity insults the poverty of the less privileged, it is socially wasteful and it plants the seeds of resentment in the minds of the havenots.
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Bibliography
The data of the project were taken from the following sources - HSBC Bank - http://en.wikipedia.org/wiki/Wealth_management - http://en.wikipedia.org/wiki/Portfolio_management - http://en.wikipedia.org/wiki/Asset_allocation

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