What Is Wealth Management?
A clear and basic definition of wealth management might sound something like this:
The complete consultative process of learning about and meeting the needs of clients who possess significant material wealth and using that understanding to develop strategies, the coordination of select experts, and the utilization of the wealth management products in order to increase, protect, and/or distribute one’s wealth.
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Wealth management can mean different things depending on the perspective at which you are approaching it.
From a financial advisor’s perspective wealth management is the ability to evaluate and form an understanding as to a client’s financial situation.
Frequently Asked Questions
01. What is wealth management?
02. What is asset allocation?
03. What is diversification?
04. Should I Seek financial advice?
05. What is capital risk?
06. What are the other risks?
Here is a list of the main areas in which a wealth manager will provide ongoing support.
Savings and Investments
If you decide to change things about every now and then, for example, if you want to invest in property, they will advise you on how to go about this without jeopardising your established growth and onward goals. Your adviser will assist you to create an investment strategy to suit your needs.
If you are vulnerable to both the annual and lifetime pension allowances, your adviser can ensure that you do not inadvertently exceed these limits, saving you a massive tax bill. In a nutshell, your wealth management adviser can advise you on how to save money regarding pension issues.
Wealth management experts are also experts in UK taxes. They can advise you on your tax status and how to maintain it. They will explain the financial differences between residing in the UK and living abroad.
If you have a lot of assets you will naturally be concerned what will happen to them when you die. Leaving an inheritance can be an issue when there is a lot to leave. Although a wealth manager will help you plan ahead and reduce the final inheritance tax bill, a large estate needs working on several years in advance. A wealth manager will be invaluable in this respect as they can begin reducing the size of your taxable estate in a highly strategic way whilst you maintain sufficient funds to maintain your lifestyle.
The earlier you consider planning your estate the better chance you have at utilising all of the tax opportunities available to you. Your wealth manager should always provide advice based on the most up to date knowledge of tax law. It is their job to make sure you are able to take full advantage of the exemptions and reliefs on offer in order to mitigate any tax bill. This means maximising the inheritance to your beneficiaries rather than the Government.
It may be the case that you have assets located in different countries. This means that your wealth manager will have to consider the rules of each jurisdiction. They will work with advisers, lawyers and other off-shore tax specialists in order to ensure compliance with the effects of multi-jurisdictional dispositions.
Other countries have very different rules to the UK that can affect:
- Who will inherit your wealth
- The amount of tax your heirs will pay
- When and where your legacy goes
Many European countries have something known as ‘forced heirship’ as part of their laws on succession. If you live in Spain, France, Portugal, Malta or Cyprus, your wealth may be automatically divided between your spouse and children. This happens regardless of what your will says. Such laws even partly apply in Scotland. UK nationals however, may be able to override this rule through ‘Brussels IV’: the European Certificate of Succession regulation. This law lets you apply British law to your estate though you should seek advice to establish if this is the right approach for you specifically and if there would be any implications for you and your heirs. This is particularly relevant if you live or have property in France.
There is a chance you may also still be liable for UK inheritance tax without realising it though with careful planning, you can have peace of mind that your legacy will be distributed as you wish and in a way that ensures your heirs don’t pay more tax than absolutely necessary.
In the UK, estate planning generally starts with the writing of a will and may include the use of a trust. When you move or own assets abroad, however, things are much more complicated.