Managing your wealth is as important as acquiring it. Remember without proper management your wealth will never be as you wanted it to be.

Wealth management involves following:

• Investment planning 
• Insuring against the risks
• Succession planning

1. Investment Planning:

Investing is important because The government and inflation are two of the most dangerous threats to your wealth. Government collects taxes form your hard earned money and inflation reduces the value of your wealth.

a) Deciding your financial goals

Many people doesn’t think about the ultimate goal and start investing. Without a destination u will not reach anywhere. So first you have to decide your goals and than plan accordingly your investment and your life.

b) Deciding the risk exposure

Than you have to decide how much risk you are willing to take. For example a person who is young and unmarried with no or little responsibility can take much higher risk compared to a married man with childrens. So decide your exposure after taking in to consideration all the factors. Remember there is risk attached with every investment the higher returns you expect the greater you have to take risk.

c) Consider inflation

The amount you think will be required for your future goals today, will not be the same when you actually require that. Thanks to inflation. So first you have to decide the future value of your financial goal. For example if I require Rs. 5 Lac after 5 years for my education than considering inflation the actual amount required after 5 years will be {500000*(1+.1)^5} = Rs.805255. So inflation will always play its role, better to be prepared.

d) Deciding the instrument to invest in

There are lots of option available out there to invest in whether its gold, or stocks or property or any other investment option. Choose the instrument according to your risk taking capability and your financial goals. And YES! Do consider taxation, if there are two option providing same returns with same risk profile one is taxable and other non taxable than always go for the non taxable. Remember taxation management is a very important part of wealth management. Always look at your investment’s after tax returns because it is the amount that u will actually get.

e) Review and change if required

Just like your health, your financial health also requires continuous monitoring keep an eye on your investment and if the situation demands do not hesitate to book losses. Remember if u keep holding on to a sinking ship you will get nothing but water in your lungs.

2. Insurance:

Insurance is also a very critical part of wealth management you should insure against possible risks. Like medical insurance for you and the family, life insurance and insure your assets also against the risks. Many people ignore the last one but you should insure your assets also, imagine your house that you have bought taking loan and what if it catches fire, you will end up in a horrible situation if u didn’t insure the house. One more point to consider insurance and investment are two different things don’t mix it up there are many plans of insurance companies where you can invest and get returns and at the same time get insurance cover also. But if you look at it carefully it gives even lesser returns than a fixed deposit. better to take a term plan, you can get the same insurance cover for a much lesser premium.

3. Succession Planning:

This part of wealth management is the most ignored part by most of people. Imagine if something happens to you and your hard earned wealth does not go to the person you want it to give. Succession planning is a very critical part, start as early as possible. Remember Its your wealth and only you have the right to decide who will take it after you. There are many ways apart from making a will, Always fill the nominee details in every document, purchase assets in joint names, form a huf etc.

CA Dinesh K Raikwal

CAclubindia's WhatsApp Groups Link


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(Chartered Accountant)
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