Although the terms seem synonymous, financial planning is the umbrella term that encompasses different types of financial management processes, such as wealth management. 

Whereas financial planning can cater to a broader range of clients and incomes, such as low-income individuals looking to buy their new home, wealth management is more specialized and serves the financial goals of more wealthy individuals. 

A private wealth manager is a financial professional who helps high-net-worth individuals with wealth planning by handling their investment assets, risk diversification, taxes, and other financial obligations. Wealth managers are tasked with the fundamental mission of protecting and growing wealth, and they largely do so by mitigating risk and market volatility.

Their role is versatile and holistic, ensuring adaptability to client’s needs and fluctuating market changes. The following are the most essential roles entrusted to a private wealth manager: 

Once they begin working with their clients, wealth managers first analyze their clients’ financial standing to ascertain which risk and growth level they require to meet their financial goals. This process requires private wealth managers to go over their clients’ financial assets, liabilities, income, expenses, and net worth to tailor a strategic wealth plan. 

Next, financial planners need to scope out clients’ short-term and long-term financial objectives in terms of investments, taxes, and estate planning. This analysis will help them create short-term objectives and leverage them to meet long-term financial goals of wealth planning. In this respect, private wealth managers should understand the changing financial landscapes and how to reduce the risk of market volatility.

The main responsibility of wealth managers is investment management, which involves creating and implementing clients’ asset strategies to maximize returns. In this stage, managers work with clients to understand their risk tolerance and financial expectations for future time frames.

Given the complexity and unique financial needs of wealthy clients, private wealth managers are required to discern which level of risk best meets their clients’ long-term financial goals. This means diversifying investments to potentially reduce the risk of loss during market volatility and monitoring market conditions in times of uncertainty. 

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

For older clients who are looking to transfer their wealth to their families, wealth managers assist them with estate planning. This process involves identifying potential tax breaks, creating trust funds, and executing strategies that smoothly transition assets to descendants.

Wealth management is a collaborative and ongoing process. Wealth managers need to regularly review their investment plans and portfolios while taking into account changes in their client’s lives and the economy. Being adaptable and having financial foresight helps wealth managers handle market volatility skillfully. 

Market volatility is characterized by multiple factors that can occur in the economy, the business world, the international political landscape, and consumer behavior. Private wealth managers are trained to handle market volatility through various analytical approaches, including measuring the standard deviation of past price changes. 

One of the most vital metrics applied to discern market volatility is the ‘implied volatility’ measure, which helps wealth managers analyze option pricing in relation to the current market expectations. High volatility in the market indicates price swings, while low volatility suggests market stability.

They likewise apply many simulated “stress testing” scenarios to clients’ portfolios that mimic possible market volatility to discern the portfolios’ resilience. By studying risk metrics, wealth managers can assess potential losses and select assets with low or negative correlations to mitigate the volatility of various portfolio assets. 

Below are some of the most common signs of market volatility that your private wealth manager is trained to identify. 

• Price swings – higher price swings indicate higher volatility 
• Changes in stock prices – abrupt changes in stock prices indicate the potential for market volatility
• Higher trading volumes – higher buying and selling activity in the market is a sign of market fluctuations
• Volatility index spikes (VIX) – this “fear index” measures market expectations among investors
• Changes in interest rates – central banks’ decisions on interest rates can influence market instability
• Inflation and recession – the reality of inflation and the probability of recession can both indicate market volatility
• Global economic indicators – vast changes in the GDP forecast, employment metrics, as well as the business and manufacturing fields, can signal volatility

While there is no comprehensive and complete list of the signs of volatility in the market, these are some of the most common and serious indicators.

Since market volatility is pervasive and is contingent on many factors in the economy and international affairs, wealth planning can help lower the risk of financial loss through insight into clients’ specific needs and foresight of emerging economic changes. 

By creating and applying strategies that encompass diversification, risk tolerance, and the analysis of market performance and volatility, wealth managers can help clients maintain sufficient liquidity, protect their assets, lower taxes, and provide a smooth wealth transfer to their descendants.

As someone with a large amount of financial assets, you need a private wealth manager who fully understands and employs the top strategies that help to reduce your market volatility risk.  Here are some of the top strategies that reduce market volatility risks.

By diversifying a portfolio’s assets into stocks, bonds, and real estate, and establishing some of the stock investments are allocated into more stable sectors such as healthcare, managers can reduce market volatility risk. 

Active portfolio management makes sure that current market opportunities and fluctuations are taken into account to offer protection of existing assets. Proactive rather than passive portfolio management is the key to wealth protection and growth.

In case of high market volatility that can compromise the stability of assets, providing flexibility and liquidity into cash or government bonds quickly is vital. The level of a portfolio’s liquidity correlates with the ability to meet financial obligations, take advantage of investment opportunities, and navigate through fluctuating market conditions.

There are significant factors that are involved in wealth planning that, through specialization and experience, only wealth managers can navigate successfully. Mitigating risk and navigating market volatility calls for the application of various financial methods, analytical metrics, and expert insights to preserve and grow clients’ wealth.

If you’re looking for a wealth manager, choose someone you trust, who is on the same page with your financial vision, and who is committed to being an active investor. At ACG, we take pride in our ability to get to know our clients’ values and go the extra mile to help them succeed. We have built our reputation as one of the top wealth planning services in Atlanta, GA and Lexington, KY, and after meeting with us you’ll understand why.

Navigate your investments with confidence by getting in touch with our experienced private wealth managers today!