1. "Wealth Management" services differ from simple "Investment Advisory" because:
They only focus on selling insurance.
They provide a holistic approach covering financial planning, investment portfolio, tax planning, estate planning, and legal advisory.
They are free of cost.
They are only for corporates.
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:
Allocating assets to family members.
Distributing investment capital across different asset classes (Equity, Debt, Gold, Real Estate) to balance risk and reward.
Putting all money in one best stock.
Investing only in government bonds.
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:
Investing in a single asset class.
Selling all assets and holding cash.
Buying only high-risk assets.
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:
Buying real estate.
Arranging for the transfer of an individual's assets to beneficiaries after death (Wills, Trusts).
Planning for retirement.
Investing in stocks.
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:
Robots serving customers in branches.
Use of drones for cash delivery.
Manufacturing robots.
Automated, algorithm-driven financial planning services with little to no human supervision.
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.