WEALTH MANAGEMENT SERVICES: PUTTING CLIENTS’ INTEREST FIRST

Posted by jeus berry on November 27th, 2020

Managing money is a serious business. It entails three key aspects: respect, responsibility and value. But when you manage someone else’s money, it acquires greater significance as it adds the fourth most important aspect: TRUST. This implies acting in a fiduciary capacity which requires putting clients’ interest ahead of one’s interest and making decisions that further enhance the customer trust and faith of a. This is not an easy role. As regulatory frameworks evolve and de-intermediation becomes the norm, investment management functions expand in terms of service offerings. As a result, these service offerings assume the shape of an institutional entity such as wealth management services.

Institutional approach to investment management benefitin several ways. Expansion of service offerings is just one of the many advantages. Wealth management companies in India today offer a long list of services to their clients–investment advice, portfolio management services, investment execution services, compliance services – from tax planning to tax-filing service, estate planning and risk management. Besides this, those companies also offer services such as asset management, banking, insurance, broking, and investment banking services through their subsidiaries or group companies. This wide range of services provides a well-coordinated /seamless experience to the customer.

Such a basket offering end-to-end solutions reduces stress for a customer. However, it brings in multiple layers of transactions. Moreover, there are costs associated with each of these transactions and based on cost respective service providers generate revenues. Wealth management services companies in India have realized the need to offer wide bouquet of services to their clients under one roof with costs as low as possible. The challenge is to introduce new service offerings without losing cost advantage.  

Regulators too have taken note of this problem. The rules have become focused on transparency in dealings and provide ample choices to individuals seeking wealth management services. Wealth management companies in India have considered this perspective. These companies have increased their efforts in providing ‘plug and play’ offerings to their clients. In this model, clients can select a particular service component from a particular service provider. The role of the wealth manager is now limited to the extent of the advice and this scenario has led to in an ‘investment advisor’ regulation.

Consequently, individual investors get more choices and added transparency as they can have mutually exclusive investment advisory services and distribution services. For High Networth Individuals (HNIs), wealth management companies in India offer non-discretionary portfolio management services. In this service, a portfolio manager offers a recommendation to a client. The recommendation is not binding on the client. If the client approves a recommendation, the portfolio manager executes the recommendation using a direct plan route in mutual funds or through buying and selling of securities on the exchange via a discount broker offering competitive brokerage rates. The client also has the freedom to execute the advice independently or through other intermediaries. This serves the much-needed principle—putting clients’ interest first. In the coming years, as financial services sector offerings receive wide acceptance among clients, wealth management service providers will not compromise on their efforts to align their and their clients’ interest.