4 Factors Why Wealth Management is necessary for Family Offices

Family offices are an outsourced solution for financial and investment management of affluent families or individuals. Primary factors to establish a family office include: need to preserve family wealth, consolidation of assets, ensuring transfer of wealth to future generations and dealing with unexpected liquidity influxes. Private wealth management advisors are employed by family offices to review and resolve issues pertaining to family finances, administration, legal and taxation. Wealth management has also gained prominence because of the aspirations of the affluent families to more control their investments, fiduciary affairs, and lifestyle management. Let’s partake in reviewing some factors which deem wealth management necessary for family offices-

1. Private Wealth Management

Wealth managers offer a financial diagnosis for family offices, defining strategic asset allocations according to aspirational needs and risk appetite. Based on this, wealth managers source most appropriate fund managers and investment ideas to the client. Once the client is onboard with the investment mandates and benchmarks, wealth managers allocate assets and complete the transaction. They also prepare a thorough report of the investment execution and performance, for the client to review and compare their investments in a uniform manner.

2. Asset Reporting

Family offices need to have a tab on their assets, acquisition costs, depreciation, and disposal. Wealth managers review and provide information such as the asset breakdown by type, and comparison of previous to current month data, depicting the percentages of holdings allocated to each asset class. They help in tracking fixed assets for financial accounting, preventive sustenance and theft preclusion. Moreover, wealth managers provide due diligence to the client regarding-

●    Assets listed in Access
●    Asset Chain of Custody
●    Asset History Report
●    Assets needing audit
●    Retired assets report

3. Estate Planning

Wealth managers manage an affluent individual’s assets, in the case of their incapacitation or death. They supervise the transfer of assets to heirs and settlement of estate taxes if any. Estate planning negates the possibility of a clash of interests amongst heirs. Wealth managers offer extensive estate management services like-

●    Creation of will
●    Setting up of trust accounts in the name of beneficiaries to limit estate taxes.
●    Establishing a guardian for living dependents
●    Reducing the taxable estate by establishing annual gifting
●    Setting up of the durable power of attorney (POA) to supervise other assets and investments.

4. Alternate Asset Classes

Alternative assets are gaining popularity amongst family offices, due to their unconventional nature in terms of the investment portfolio. These assets include rare coins and stamps, artworks private equity, trading strategy indices, venture capital and hedge funds. Investing in such alternate asset classes help diversify an investor's portfolio. Being non-traditional investments, they help in sustaining market volatility. Due to their lower liquidity and mispriced value, alternative assets offer excellent arbitrage opportunities. Investing in alternative asset classes isn’t appropriate for everyone. As a result, it is necessary to take the help of wealth managers, who review client’s risk tolerance and investment objectives before offering ideas to invest in new opportunities.

Last Few Words

Family offices are more than just one individual, and their wealth needs to be sustained to reap dividends over a substantial time period. To maximize their wealth management efficiency, services of wealth management firms is a necessity. Wealth managers understand your investment needs and goals, thereby providing appropriate investment guidelines to maximize wealth, and deal with unexpected liquidity influxes.

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Managing Brands For Success: The Basics

In economics, luxury brands are those brands whose demand increases proportionally as incomes rise. They can also be defined as being the contrast to  "necessity goods": demand increases less in proportion to income.  Luxury brands constitute the majority of luxury products. The term 'luxury brand' is synonymous with high prices, luxury, and high quality. They are often referred to as Veblen or Superior goods. The expenditure towards advertisement for the average luxury brand is about 5-15 percent of sales revenue. This rises to about 25 percent with the inclusion of other communication expenses for efforts such as public relations, sponsorships and promotional events.

Market Characteristics

Luxury brands in India are said to have high income elasticity of demand. This is because as people become wealthier, they purchase more luxury goods. A decrease in incomes will also see a proportionate drop in demand. The elasticity is not constant at all levels, and some changes may occur at different levels of income. With time, a luxury good may become an inferior good or a normal good, depending on income levels. Luxury products are Veblen goods, with negative price elasticity of demand, for example; making an expensive perfume can increase its perceived value to such an extent that, as a luxury good, sales can go high enough, rather than down.

Market Trends

The three common trends in the global luxury goods market are consolidation, globalization and diversification. Consolidation is used to define the involvement of the ownership of brands and growth of big companies across multiple segments of luxury products. Globalization is a result of an increase in availability of these goods, tourism and additional luxury brands. Some examples include Armani, Burberry and L’Oreal, which dominate the market in areas ranging from luxury fashion to cosmetics. Leading global consumer companies also attract industry, to avail profits in the consumer goods market.

Certain brands are considered to be premium brands in India, as people believe they are of a high quality and worth every Rupee. The big question is why people are willing to pay a high price for a product when there are cheaper alternatives? There are specific tangible and intangible attributes that give this class of products such a  status:

Sensual: They arouse the senses and make people feel indulgent.

Rare: They represent an uncommon choice and draw attention.

Confident: They boost the customer's confidence level.

Quality: They are consistent and attract obsessive attention.

Conclusion 

Managing a brand is the most difficult challenge in the field of marketing. Like any other business, brands must also pursue and seek growth strategies. Unlike many businesses, brands must present themselves in such a way that their images don't dilute customers' sense of pride and exclusivity. Some strategies are off-limits in this pursuit. Brand managers must know when it is best for the brand to ignore short-term opportunities and how to brush-up the brand's long-term health.

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