Core Elements of Wealth Management Services In most basic sense, wealth management services involve fiduciary responsibilities in providing

professional investment advice and investment management services to Institutions, funds (Pension/mutual/Hedge), corporations, trusts as well as HNWIs. In the present context of our discussion, we would keep our focus limited to HNWIs. Some of analogous terms used for wealth management could be considered as Portfolio Management, Investment Management and many times Fund Management or Asset Management. Depending on the mandate of the services given to the Wealth Manager, wealth management services could be packaged at various levels A) Advisory Wealth manger s role is limited to the extent of providing guidance on investment/financial planning and tax advisory , based on client profile. Investment decisions are solely taken by the client, as per his /her own judgment. b) Investment Processing (transaction oriented) Clientengages wealthmanagerto executespecifictransaction or set of transactions. Investmentplanning, decision andfurther management remain vestedwith theclient. c) Custody , Safekeeping andAssetServicing Clientis responsible for investmentplanning, decision andexecution. Wealth manager is entrusted withmanagement,administrationand oversightof investmentprocess. d) End-to-end Investment LifecycleManagement Wealth manager owns the whole gamut of investmentplanning,decision, executionand management,on behalfof the client.He is mandated tomake financial planning,implement investmentdecisions and manage the investment 30 throughoutits life .W ealthmanagementservices comprises of following Key functionareas : a) FinancialPlanning

b) Portfolio Strategy Definition/ Asset Allocation c) Strategy Implementation d) Portfolio Management e) Strategy Reviewand Alignment a) F inancialPlanning

Clientprofiling takes inaccount multitude ofbehavioural, demographicand investmentcharacteristics of a client that would determine eachclients wealth management requirements. Some of key characteristics to be evaluated for definingclients investment objective are: Currentand futureIncomelevel Familyandlife events Risk appetite / tolerance T axabilitystatus Investment horizon AssetPreference/restriction Cash flow expectations Religious belief (non investmentin sin sectorlike- alcohol,tobacco,gambling firms, or compliant with Sharia laws) BehaviouralHistory(Patternof past investment decisions) Level of client s engagementin investment management (active/ passive) Presentinvestment holdingand asset mix 31

Based on the client profile, investment expectations and financialgoals oftheclient could be clearly outlined. Defining investment objectiveshelpsto identify investmentoptionsto be consideredfor evaluation. Investment objective for most of the investors could be generallyconsidered amongst the following: CurrentIncome Growth (Capital Appreciation) T ax Efficiency(T ax Harvesting) CapitalPreservation(often preferredbyelderlypeopleto make sure theydont outlivetheir money .) b)Portfolio StrategyDefinition/Asset Allocation Defining Portfolio Strategies and Portfolio Modeling After establishing investment objectives, a broad framework for harnessing possible investment opportunities is formulated. This framework would factor for risk-return tradeoff of considered options, investmenthorizon and provide a clear blueprintfor investment direction. Investmentstrategy helps informing broad level envisioning ofasset class (Securities, Forex, Commodity , Real State, Reference and Indices, Art/Antique and LifestyleAssets (Car , Boat,Aircraft)), market, geography , sector and industry . Each ofthese assetclasses is to be comprehensively evaluated for inclusion in portfolio model, inview of definedinvestment objectives. Whiledefining the strategy , consideration of clientpreference

oravoidance forspecific asset class, risk tolerance, religious beliefsis the key element, which would come intopicture. Thus, for a client with a beliefof avoidance of investmentin sin industries(alcohol, tobacco, gamblingetc.) is to beduly taken care of . Likewise, for a client looking forShariacompliantinvestment, strategyformulation shouldconsider investment options meeting with the client expectations. Determination of Portfolio Constituents and Allocation of Assets 32 Guided with the investmentstrategy , constituentsin portfolio model are determined, whichwould directly and efficiently contribute towardsclients investment objectives. Thus, a broad levelinvestmentguidanceof investmentin fixed incomein emerging market would furtherdetermine classification within Fixed Income such as Govt. or corporate bonds, fixedor variablerate bonds, Long or shortmaturity bonds, Deep discounted or Par bonds, Assetbacked orother debtvariants. Returnprofile, risk sensitivity and co-relation of constituents within portfolio model would help to determine the size (weightage) of eachindividual constituent intheportfolio. c) Strategy Implementation Having decided the portfolioconstituentsand its composition, transactions to acquire specific instruments and identified assetclassis initiated. As acquisition costwould be having

bearing onoverall performance of the portfolio, many times process of assetacquisition may be spread over a period of time to takecare of marketmovementand acquiretheasset at favourable pricerange. d) Portfolio Management Portfolio Administration Portfolio Administrationinvolves handling of investment processes and asset servicing. This would also require tax management, portfolio accounting, fee administration, client reporting, document management and general administration relatingwith portfolio and client. Thisfunction would involve back office administration and custodialservices to manage transaction processes (trading and settlement) - interfacing with brokers/dealers/agents, F und managers, Custodians, Cash Agent and many other market intermediaries. Performance Evaluation and Analytics Performance evaluationof the portfolio is an ongoing process. Portfolio return is continuously monitored and analyzed with respect to definedportfolio objectives. Analysis dimension could be varied simple andcomplex. Thesemay include -absolute return, relative return(in comparisonto chosen benchmark), trend, pattern, cost impact, tax impact, concentration, lostopportunity and otherform of sensitivity and what-if analysis. Any deviation of portfolio performance observed during performanceevaluation wouldlead to strategyreviewand anypossible alignment of portfolio strategy .

33 e)StrategyReview and Alignment Recalibration of Portfolio Strategy Based on performance evaluation and future outlook of the investment, portfoliostrategy isevaluated on periodic basis. T o keep italigned with the defined investment objectives, portfolio strategy is suitablyre-calibrated from time totime. Many times, review of portfolio strategywould be necessitated due to change inclient profile orexpectations. Rebalancing, Reallocation and Divestment of Assets Anyre-calibrationof strategyand consequentchange in portfolio model would require rebalancing oftheassets in portfolio. This would be achieved through rebalancing the asset (divesting over-allocated part andacquiringunderallocated), relocation(from one sectortheother or from one instrument to other instrument in the same class) or completedivestment.