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Published on March 11, 2008

New services and funds developed by banks throughout the region are all coming under the umbrella of wealth management. But behind all the hype, what does it really mean?

In essence, wealth management is about providing customers with a long-term strategy that accumulates, protects and allocates their wealth. This means providing them with a sound and secure portfolio of long-term investments that will allow them to grow and allocate their wealth accordingly.

The Asia-Pacific already has 2.6 million rich individuals, and their number is growing at an annual rate of 8.5 per cent. In Thailand alone, 100,000 individuals are estimated to be in the high net-worth bracket.

A first step in wealth management is identifying the individual's risk profile and the return they require from their investment.

Traditionally, the older the person, the more risk-averse he is. However, this is not always the case. In general, wealthy people are more ready to take risks than those on lower incomes. It is their willingness to take risks, after all, which enabled them to build their wealth in the first place.

Another factor to consider is the potential return for a portfolio on a long-term basis. As with any long-term investment, it is essential that customers maintain a realistic required rate of return in accordance with their risk tolerance.

As well as risk management, the allocation aspect of wealth management is becoming an increasingly important issue for advisers, with Asia going through a generational change in wealth - 54 per cent of the region's high net-worth individuals are already above age 56. As they move into retirement, a key element of their wealth management is formulating the means to pass on this wealth to the younger generation.

Investors can now take advantage of a growing number of asset classes, with bonds, hedge funds and private equity funds now becoming readily accessible to retail investors. To increase the range of options and meet investors' needs, most banks today take an "open architecture" approach in their wealth-management services, offering financial products from outside so that their clients can choose from among the best available solutions.

With so many wealth-management services now available, perhaps the most important decision for any investor is whom he chooses to be his wealth manager. It is important to choose an adviser who offers sound wealth management and planning advice, rather than a salesman who may promise large returns but who, at the end of the day, is only interested in achieving sales targets.

When considering how to choose a wealth manager, you need to ask yourself three key questions: does he offer suitable financial products, does he have the relationship-management skills I require, and does he have the experience and proven track record in this field?

If the answer to all of these questions is yes, then there's a good possibility of making the right choice.

Bordin Unakul

The Nation