Wealth management, a significant part of everyone’s life, is often left unattended, majorly due to lack of awareness. Amid Covid, when everything is uncertain, investing correctly becomes more prominent. A report by Boston Consulting Group (BCG) reveals that during the Covid-19 pandemic India grew from 2015 to 2020 by 11% p.a. to $3.4 trillion and is expected to grow by 10% p.a. to $5.5 trillion by 2025. To understand the rising important of wealth management, especially during the pandemic, Rashi Aditi Ghosh of Elets News Network (ENN) spoke to Raghvendra Nath, Managing Director, Ladderup Wealth Management. During the interaction, he said, the pandemic is a short-term phenomenon and is going to pass away sooner or later. But with the growing income, people will have to make decisions regarding investing this wealth safely and securely that also generates optimal returns.
1. Why is wealth management significant today? How is Ladderup Wealth Management ensuring hassle-free wealth management?
As people grow wealthy, they have to grapple with the problem of investing this wealth safely and securely that also generates optimal returns. Each one of us has goals and aspirations that keep growing bigger as we progress in our careers. So efficient handling of wealth, as its size keeps growing, becomes a complex issue.
Moreover, there are a multitude of investment options in each asset class and to figure out what would work for oneself is not an easy task. It is very easy to get confused or get enamoured with advertisements or sales talks and invest in places that carry significant risks.
And lastly, the problem of investing is not a one-time problem. As long as you have wealth, you will have to constantly keep looking for the right investment options, monitor the health of your portfolio regularly and keep adjusting your portfolios to the new realities of the market, the economy as well as personal finances.
All these things require Wealth management skills and its importance is now more than ever.
Ladderup Wealth Management has been helping clients for more than a decade. We understand that wealth management is about a hassle-free experience, where the client can trust the competence and integrity of his wealth manager so that he can continue to carry on things that matter to him in life. There is a big difference between the creation of wealth and the management of wealth. The first principle of wealth is capital preservation and therefore risk management must be at the forefront of the entire advisory process. Ladderup Wealth has developed an elaborate risk management framework to make sure that clients generate returns commensurate with the risk levels that they are comfortable with.
A wealth manager has a very serious responsibility on their shoulders as the well-being of clients is dependent on good investment decisions. Therefore, every investment recommendation to the clients should be unbiased and objective where the sole agenda is to benefit clients and recommend products that fit into their asset allocation profile. Too often, the wealth managers become sales managers and that ends up shortchanging clients’ interests.
2. In your view, why Succession Planning is so important in current times? Would you like to shed some light on the benefits of Wills and limitations?
Succession Planning is always important. Life is uncertain and things can change in a person’s life in a matter of seconds. Succession planning is best done, when you are healthy and happy and when you have a clear mind. No one thinks about writing a Will when one is in a critical state as at that time the only thought is about survival.
The pandemic in the last year has brought to fore the fragility of life. Never before has this generation of the world witnessed such a large-scale loss of life. Times like these remind us of our own well-being.
Will is one of the most important documents that one creates in his/her lifetime. That one document shall help in transitioning all the wealth that the person has earned to his loved ones, in the manner that he/she deems appropriate. Each one of us is unique and so are our wishes. You must control how you want to distribute your Estate rather than allowing the laws of succession to dictate the distribution.
Moreover, a proper succession plan ensures that your family can transition the Estate easily and quickly and fully.
Yes, Wills have some limitations. For instance, Wills assume validity only on the demise of the person; Wills have to be probated; Wills result in immediate distribution of wealth; etc. However, one should still create a Will as the benefits far outweigh the limitations.
3. What major changes and challenges do you see pertaining to wealth management post covid outbreak?
One of the big things that happened after the Covid Outbreak was the drastic fall in Equity Stock prices in March. The nervousness around Covid was a global phenomenon and almost every stock fell sharply in that short period.
For the new investors who would have started invested post the financial crisis of 2008, a crash like this was the first experience. The first time, many such investors experienced the pain of witnessing wealth-getting wiped out even when the quality was intact. These experiences alter your perspectives and make you more mature. I am sure, investors who could sustain and survive the volatility of March and continued to remain invested are an elated lot and have a much better understanding of market volatility.
Post-Covid, the world is living in uncertainty but despite that Companies have shown some amazing resilience in these tough times.
From a wealth management perspective, the sudden drop in interest rates has reduced the relative attraction of Fixed income investments as the investors have to adjust to new realities. Also, Gold has made a strong comeback in asset allocation with a very smart rally last year.
Wealth management, however, is a dynamic and iterative exercise and no solution can last for long. A good wealth management plan should keep pace with changing times and the environment and keep adjusting the allocations as new realities emerge.
4. The economy is under great pressure due to covid induced challenges. Is it the right time to invest in mutual funds?
Pandemic is a short-term phenomenon and is going to pass away sooner or later. Everyone, including the government, local bodies, companies, and the general public is working overtime to reduce the impact on the Economy and people at large.
While we witnessed a sharp downturn in the economy last year, there is an equal hope of a strong recovery this year. Also, generally, it is seen that after every such crisis, the Economies bounce back much more strongly than they were before the crisis.
Stock markets, in some way, are reflecting this confidence on the future growth prospects of the Economy in the coming years.
So yes, this is as good time as any to invest in mutual funds.
5. If compared, Mutual Funds Vs. PMS Vs. Alternative Investment Funds, what would be the right choice in the current scenario?
Making money in the market and off it requires a certain degree of expertise, understanding and a healthy risk appetite. Given the plethora of choices available for investments currently available in the market, it can be daunting for someone to make the right decision and commit to it for a period.
In order to make the right choice, one must look at the portfolio level and decide on investments that should be made by looking at the complete portfolio rather than looking at an investment in isolation.
If an investor is looking for a differentiated product and customised investments, then AIFs and PMS tick the box compared to the Mutual Funds.
Mutual Funds appeal to a large mass of people, as they are standardized and process-driven vehicles while at the same time also benefit from fund manager’s expertise. If one does a depth analysis, it is possible to find mutual funds that can outperform the benchmarks consistently.
PMS and AIF are vehicles for large investors that allow a higher degree of customization and therefore can be a good way to diversify for sophisticated and large investors.
Ultimately, however, whichever vehicle you invest in, a lot depends on the fund manager who is managing the portfolio. We have seen mutual fund managers massively outperforming markets and delivering superior returns for long periods. And the same time, we have also seen PMS and AIF managers delivering poor returns even in a good market environment.
I mean, whenever you are choosing an investment vehicle, whether it is MF or PMS or AIF, critical analysis as well as regular follow up is required to ensure that the fund managers that you have chosen are delivering expected performances. And for that, you should look at hiring a high-quality wealth manager who has the integrity as well as the competence to do his job and manage your wealth.