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All About Fund Management
Who doesn’t want a secure future? In order to accomplish goal, it is necessary for people to take a look at their finances. You have to have financial goals and plans in place for achieving them, or else you will find yourself in a lot of problems. But, how do you go about this process? This is where fund management comes in, as it boasts a wider scope and its primary motive is the creation of funds. Not everyone is born with a silver spoon in their mouth and they have to make an effort into accumulating wealth. As such, fund management refers to the process of wealth creation where a team of experts and professionals analyze the financial needs of their clients to suggest appropriate financial products.
This process comprises of fund protection, which means risk management, accumulating wealth, which means growing your asset base, putting this wealth to work, which involves generating income from the asset base, and lastly, wealth distribution, which is about succession and retirement planning. Let’s take a closer look at exactly what falls under the category of wealth management:
Identifying and analyzing goals
The first step that fund managers will take in order to provide you with their services is to identify and analyze your financial goals. In order to do this, they have to follow a few other sub-steps. To start with, they ask you appropriate questions that can help them understand what you are expecting in the long-term and the financial goals you may have in mind. Once they have their answers, they will test and assess your risk appetite because this can help them in choosing investment opportunities on your behalf.
They also have to understand your liquidity needs at a particular time, such as when you are getting married, or at periodic intervals. It also requires understanding family values and any issues related to it because it can have an impact on your succession and wealth transfer plans. Also, fund management will take into account lifestyle maintenance and enhancement.
Recommending and devising a plan of action
After analyzing the objectives and needs of the clients, fund managers then devise a plan of action and recommend it. This plan comprises of the right mix of assets, which can generate an income for the clients and also assist in creating money in the long run. This particular step focuses on digging deep into assets, which involves their creation as well as allocation for the purpose of diversification. This is important for managing the risks inherent in this process.
Apart from that, fund management also involves analyzing the current assets and investments that a person may have. If there are any liquidity or tax concerns, they have to be addressed at this stage and wealth managers also have the responsibility of figuring out whether there is a gap between the current investment position and the plan of action they have recommended. Consultations are made with the client here to ensure they are satisfied with the plan before the managers can move onto the next step.
Different models and techniques can be implemented by fund managers for coming up with a plan of action, such as discounted cash flow model, after tax profits model, and more.
Implementing the plan of action
After the fund managers have received their client’s approval for the recommended plan of action, then it is time for them to document it and come up with an asset allocation and investment strategy. The purpose of doing so is to highlight the pattern of income generation and how money will be created in the long term. This documentation will also provide details about transfer of assets and money, along with succession plans. It takes a little while to implement the fund management plan; it will not happen overnight. In addition, the wealth manager has to revisit this plan a number of times to match it with what is happening in real time in the financial markets and the economy.
Regular evaluation and communication
After the fund management plan has been implemented, it doesn’t mean that the job of the fund manager is done. They will continue to evaluate how the plan responds to the existing market conditions and they will try to modify it accordingly, in order to stay updated and to get maximum benefits on behalf of their client. They may have to rebalance the portfolio, make changes to the tax structure and evaluate their impact on wealth creation. In this step, there needs to be strong and open communication between you and the wealth manager, as it can help in building trust and rapport.
Other than taking these steps, there are some other things that you need to bear in mind when it comes to money management. First and foremost, you need to choose the right fund manager in order to get the results you are after. Make sure you select someone who is ready to answer questions and is willing to communicate at every step of the process. Remember that money management is not just about your portfolio; it involves a great deal more than just assets. Moreover, it is of the utmost importance for people to revisit their fund management plan every now and then. There have to be some modifications to the asset allocation pattern and you may have to make restructuring decisions or perform a liquidity analysis on the basis of the current market status.
It is the job of the fund manager to do all these tasks and they will also keep you updated about your money, all the while maintaining confidentiality. Furthermore, people should always make retirement and succession planning part of the fund management process rather than cutting it out. It can make it easier to handle the process of retirement and ensures that you can be comfortable and not have to go through any hardships. As far as succession is concerned, it eliminates the possibility of fund and property quarrels amongst family members.