Wealth’s definition varies from person to person, depending on how the way they view the issue. That’s why financial planners and estate planners must put the interest of their client first before their own interest, but really, what makes up the clients’ interest? The topic is kind of the same from the previous blog but here, the definition of wealth and its different aspects are further explained.
Initially, people might probably think of wealth as the amount of money or financial assets one has. Because of that, wealth management, viewing from that perspective, becomes the development of financial plan aimed at acquiring and keeping as much of one’s financial assets as possible. However, Aristotle, The Greek Philosopher, in his book “The Nichomachean Ethics” gave his view and a broader meaning of wealth. In that book, Aristotle came up with the term “real” wealth. According to Aristotle, the “real” wealth is found in achieving eudaimonia, the Greek word for happiness, which is best translated as living the fulfilled life. Before we dig deep in that Aristotle view, let us first see on what the internet has to say with wealth and wealth management.
According to Investopedia.com, Wealth is a measure of the value of all of the assets of worth owned by a person, community, company or country. It is found by taking the total market value of all the physical and intangible assets of the entity and then subtracting all debts. Wealth Manager on the other hand is defined by Forbes.com as the science of solving/enhancing one’s financial situation. From the financial advisor’s perspective, wealth management is the ability of an advisor or advisory team to deliver a full range of financial services and products to an affluent client in a consultative way. But theoretically, a wealth manager can provide a single financial product in existence. In Aristotle’s view, monetary wealth is a desirable thing but it should not be sought merely for itself. It should be used to attain further goals or the ultimate goal – which is living well. What is especially debilitating about accumulating wealth for its own sake is that you’ll lose sense of limits. Because if gaining financial assets is your only goal, you can never be satisfied, since there is always more to obtain.
The issue though, is how will the Wealth Managers handle their clients and serve these clients’ best interest. As I said, this is kind of similar with the previous topic, which is Social Responsibility Investment. Wealth managers may be faced with situations that makes them question the extent of their ethical involvement with their clients. They are faced with questions like do they overreach when Aristotle claims that if it is an advisor’s responsibility to look out for the client’s interest, it behooves that advisor to take note of the differences between fiscal and real wealth and develop ways to get the client to recognize those differences when they are relevant? Or do they need to make their clients aware with the obligations that are tied with the possibility of harm? That’s the questions that there wealth managers need to ponder on.
In summary, wealth management is the consultative process of meeting the need and wants of affluent clients by providing the appropriate financial products and services. Wealth management entails coordinating a team of experts to address the needs and wants of affluent clients. There’s considerable research showing the income advantages of financial advisors who are wealth managers to those that are principally investment oriented. Basically, the understanding of a wealth manager’s clients should be more elaborated and should not be limited to what is important. They should also know the process on how it works and that their ultimate goal should not be focused only on the short run but more on the long run.