A type of asset management, private wealth management is a broad term that describes techniques used to maintain and grow the wealth of a private individual. Generally, the private wealth management refers to asset management for wealthy individuals, often called high-net-worth clients by professionals in the field. Private wealth management can also be called private asset management or private banking. A professional hired to help someone with asset management can be called a wealth manager. Services performed by a wealth manager are diverse, but frequently include investment strategy, financial planning, and tax management.
Used to garner additional assets for a high-net-worth individual, private wealth management investment strategy involves choosing an investment portfolio to ensure the best return from invested money. Strategies used in private wealth management investment strategies include passive management and active management. When using passive management investment strategies, a private wealth management professional chooses strong long-term investments in order to make as few portfolio changes as possible, reducing the transaction fees paid by the investor. This is a strategy based on the assumption that the market itself will grow in the long term. Investors using active investment strategies intend to beat the average market increase by making frequent carefully calculated trade decisions.
Financial planning is the process of setting financial goals and determining the steps needed to realize those goals. Generally, financial planning includes figuring out the individual's current financial status and setting budgets and spending limits that will move the individual closer to his financial goals. Financial planning can also include retirement planning and estate planning. Planning financial goals can help reduce overspending that can chip away at an individual's savings.
Tax management is an important aspect of private wealth management. It involves strategies to reduce federal and state taxes paid by the private individual. Done properly, tax management can save a wealthy individual a great deal of money. Common tax reduction techniques include estate planning, charitable donations, and gift planning.
Charitable donations to the right organizations and gifts to family members can save on taxes because these gifts are tax exempt in many places. Estate planning involves the handling of an estate to reduce the amount of estate tax, also called inheritance tax, paid when a deceased person's property is transferred to its intended recipients. Private wealth management professionals can help a person make decisions before and after death that reduce the taxes paid on his estate.
