One of the most important aspects of wealth management is the assessment of risks to that wealth, or risk management. While other aspects of wealth management have to do with specific lifestyle planning or using wealth to grow, risk management is a purely defensive endeavor, with the sole purpose of protecting your wealth. The people who use wealth management services are often individuals with a high net worth, and thus have a lot to lose. Risk management assesses all liabilities and finds the best way to protect yourself through legal networks, comprehensive insurance, and smart decision-making.
What Risk Management Covers
The first part of any respectable wealth manager’s job is to analyze the potential for loss weighed against a client’s assets. High net worth individuals often millions of dollars tied up in property and luxuries. If any part of a client’s wealth is left unprotected by insurance, or is exposed to legal conflict, then it increases the risk that a client’s assets could be lost. However, risk assessment also needs to cover the potential of a client to continue to grow their wealth, and needs to examine the threats to that potential.
Once you have spotted the areas that could expose a client’s wealth to damage, and have mapped out a comprehensive list of possible threats, then a wealth manager’s job is to put up safeguards to protect these points from damage. This is done through insurance policies that comprehensively protect a client’s assets, as well as ensuring that a client is protected from any legal threats that could come back to them. Legal contracts that protect a client from liability are a crucial measure in this process. A wealth manager will be aware of these liabilities and always be thoughtful of how they are changing.
A wealth management company cannot treat every client like they are the same. Part of the risk management is to assess the client’s lifestyle and work within the bounds of their lifestyle choices and idiosyncrasies. By nature of the uniqueness of every high net worth individual, some clients will have a higher potential for risk than others. The important thing is that a wealth manager takes note of this and keeps an open line of communication with the client, so that they work within the confines of the client’s personal choices.