1. "Wealth Management" services differ from simple "Investment Advisory" because:
They are only for corporates.
They provide a holistic approach covering financial planning, investment portfolio, tax planning, estate planning, and legal advisory.
They are free of cost.
They only focus on selling insurance.
Explanation:
Wealth Management is an integrated process. While investment advisory focuses on asset allocation, Wealth Management looks at the entire financial life of a High Net Worth Individual (HNI), including succession and tax optimization.
2. In Wealth Management, "Asset Allocation" refers to:
Distributing investment capital across different asset classes (Equity, Debt, Gold, Real Estate) to balance risk and reward.
Investing only in government bonds.
Putting all money in one best stock.
Allocating assets to family members.
Explanation:
Asset Allocation is the core strategy of wealth management. By diversifying across non-correlated asset classes, it aims to optimize returns for a given level of risk.
3. In Wealth Management, "Rebalancing" a portfolio involves:
Buying only high-risk assets.
Investing in a single asset class.
Selling all assets and holding cash.
Adjusting the weightings of assets in a portfolio back to its target allocation.
Explanation:
Over time, market movements can change a portfolio's asset mix (e.g., equity becomes 70% instead of 60%). Rebalancing involves selling overperforming assets and buying underperforming ones to restore the original risk profile.
4. "Estate Planning" in Wealth Management involves:
Investing in stocks.
Buying real estate.
Planning for retirement.
Arranging for the transfer of an individual's assets to beneficiaries after death (Wills, Trusts).
Explanation:
Estate Planning ensures the smooth transmission of wealth to the next generation, minimizing legal disputes and taxes. It is a key component of comprehensive wealth management.
5. "Robo-Advisory" refers to:
Automated, algorithm-driven financial planning services with little to no human supervision.
Robots serving customers in branches.
Manufacturing robots.
Use of drones for cash delivery.
Explanation:
Robo-advisors use algorithms to assess a client's risk profile and goals to recommend and manage an investment portfolio at a low cost.