Private Wealth Management. A Q&A with Jean Akol, CFA
As held with the Orion Wealth Management Community
Question: Can you explain the concept of wealth management?
Jean Akol: Sure, at its core, wealth management refers to investment management and financial planning, generally tailored for private investors such as individuals, couples, or families. This differs from the approach for institutional investors, which could include banks, insurers, pension funds, and endowment funds.
Individual investors each have their own particular goals, constraints, potential behavioral biases, and circumstances which require personalized strategies. Wealth management services can range from general advice to highly specialized and tailored services, depending on individual needs.
Question: What is considered wealth and what would you say are the necessary elements for an effective wealth management system?
Jean Ako: From a wealth management perspective, individual wealth essentially consists of two components: Human Capital and Financial Capital. Human Capital is the projected future value of an individual's labor income from a business or profession. The higher a person's education and skills, the higher their human capital. Financial Capital refers to financial assets or possessions.
Throughout a person's life, the proportion of each in this equation changes. The aim is to transform human capital to financial capital over time through ongoing earnings.
Question: Could you elaborate on the key areas of wealth management? How do private individuals benefit from it?
Jean Akol: The key areas of wealth management include Financial Planning, Investment Management, Risk Management, Tax Planning, Estate Planning, Retirement Planning, Cash Flow Management, and Debt Management.
More importantly, it also includes education and professional guidance. It's essential to remember that your wealth isn't limited to money. Everyone, no matter how much wealth they currently possess, can potentially benefit from wealth management.
Through wealth management, you can articulate, quantify, and prioritize your financial goals and objectives, understand the reality of your financial situation and devise optimized investment strategies.
Question: How does one engage a Private Wealth Manager and how do they determine who to choose?
Jean: Many financial institutions offer wealth management services, but it's also important to consult with professionals who have specialized knowledge and skills in relevant areas.
Steer clear of relying solely on advice from unqualified friends or motivational speakers for financial planning. Instead, consider seeking advice from credentialed professionals like CFAs, or experienced professionals in the financial field.
Question. How does private wealth management work? Does it mean I get a hands-off approach?
Jean: The approach varies. Some investors like to be informed and involved in every aspect of their financial plan and investments, using their wealth manager more as an advisor. Others prefer to delegate decisions to their wealth manager. This approach depends on individual preference and complexity of their financial situation.
Question: Managing risk seems crucial in wealth management. Could you tell us more about this and when to engage professionals?
Jean: In spite of being a significant aspect of financial planning, risk is often overlooked. Risk exposure could come from fluctuations in capital markets, unexpected events, or even longevity risk from outliving your resources.
A solid wealth management plan can help individuals recognize and manage their risk exposures. An understanding of risk exposure can also guide investment choices. It's important to review risk exposure periodically as it changes over the life cycle. Therefore, risk management is integral in financial planning.
Jean Akol, a distinguished CFA and ACCA accredited professional, is a notable figure in the Finance and Risk Management industry, currently working within the Reinsurance Industry. Jean offers his expertise in crafting personalized Wealth Management strategies for his clients. Should you be interested in exploring a detailed, customized conversation regarding Wealth Management with Jean, please feel free to contact me, and I'll gladly connect you to him.
Alex Kakande