Top 10 wealth management mistakes

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: What is the difference between wealth management and portfolio management?

This is easily one of the most frequently asked questions by many – even those who are already tied up with wealth management services. And, with the number of wealth management service providers increasing by the day, the definition will tend to get more diffused.

Wealth management does mean a lot many things to many people. For some it actually amounts to managing the asset portfolio, which usually has three components, like real estate, equity holdings and some insurance. And even in this, the real action is around the equity portfolio – how much you are earning, how your capital is growing, and so on.

But the essence of wealth management, as most managers would tell you, is distinct from portfolio management. It is more long term and entwined with your life rather intimately. It is the creation of wealth to meet individual goals and the goals of the family. It even goes beyond your own life, it could even include your philanthropic and other related aspirations of seeing that your wealth has grown and is well distributed.

“Often in India, wealth management is seen as accumulation of money and not about the ‘wealth’ as such. More money does not mean more wealth,” says Patrick Schneider, who provides consultancy services to many overseas wealth management firms. And this is not an India-specific phenomenon. Many countries that see an explosion of wealth will have a large number of people who will have to deal with such dilemmas, he adds. And, India has the fastest growing number of millionaires in the world and therefore the problem is rather prevalent here.

1. Going it alone

And one of the biggest mistakes people make in this area of wealth management is to do it alone. “I think I can manage stuff on my own and after all I have the knowledge to handle it,” is the usual response. And after completing his post graduation in business studies, even Dhiraj Nikam felt this way. “But it gets more than that. I cannot concentrate on my profession and business and also manage wealth. This is a realisation I had,” he adds.