Overview of Wealth Management Products

The following is not a complete list of all the wealth management products available to high-net-worth individuals, but is a composite list of the mainstream and most popular investment products.

Money Market Funds

This investment is considered fairly conservative and safe and the clients funds are usually invested in low risk commercial securities or government bonds but are slightly riskier than money market accounts as explained below. The client should be aware that the value of the principal may decline but very rarely does.

Money Market Accounts

As with all portfolios, there must always be sufficient liquidity, or liquid wealth to fund unforeseen emergencies. This is a safe investment vehicle which offers a slightly higher interest rate than deposit accounts but comes with a few more restrictions such as fewer monthly transactions, higher minimum transactions and higher fees for early withdrawals.

Certificate of Deposits

Certificate of Deposits are sold or offered by banks usually on a three, six, or twelve-month basis. They are considered very low risk, offer a low return and are usually invested in by the more conservative high-net-worth individual. Again, penalties will be incurred if liquidated before the maturity date.

Equities, (Stocks and Shares)

Equity investment is a popular wealth management product. Equity investment is a globally popular form of investment from the person in the street all the way to high-net-worth individuals and companies such as hedge funds and private equity funds.

However, for the high-net-worth individual the wealth manager will have an investment strategy that includes different types of shares such as, value stock, penny shares, voting shares, growth shares, common shares to mention but a few. The value of stocks and shares are subject to market fluctuations and can rise as well as fall.

Bonds

Bonds are considered to be another conservative and safe wealth management option, and if held until the maturity date, the bond should return the principal to the investor. Over the lifetime of the bond the holder will receive regular interest payments referred to as coupons.

Mutual Funds

This is a very popular wealth management product, especially in the United States, and is where the wealth manager invests in a range of products such as securities, bonds certificates of deposit, equities and other investment vehicles.

Typically, the fund can range from highly conservative to highly risky, and can usually be a mixture of the two. The wealth manager will always advise clients what the fund is investing in, as it is the underlying assets that determine the risk profile.

Exchange Trade Funds

An exchange traded fund is another popular wealth management product, and like a mutual fund is a basket of shares, securities etc which are bought and sold on an exchange. The vehicle is traded like individual shares and are bought and sold on a stock exchange, the price being based on supply and demand.

Like the mutual fund the exchange traded fund contains diverse risk, but unlike the mutual fund the costs associated with this investment vehicle are comparatively low.

Structured Products

Structured products are offered by wealth managers to the more discerning and sophisticated high-net-worth individual who are expected to understand how these products are assembled and the risks involved.

Structured products are considered an exotic and bespoke investment vehicle that promises higher returns, (with higher risks), and accordingly have higher fees attached to them.

Hedge Funds

Hedge funds are synonymous with high returns and high risk. The funds are managed by professional money managers, and investments are basically for the ultra-high-net-worth individuals as the amount of investment is significant.

The long short hedging and investment strategies usually means these funds are highly leveraged to meet the promised high returns. The risk factors therefore are significantly higher as well, especially as hedge funds are known for derivative investments.

Private Equity Funds

A private equity fund is often structured to act as Limited Liability Company or Partnership where the funds are amassed from various private investors such as the ultra-high and high-net-worth individual.

Private equity companies usually invest in companies who they feel have a project that will return them a higher than normal profit. They can provide much needed capital to take an on-going project to market or provide seed capital for start-up companies. Once again, the return can be highly profitable but comes with a comparable risk factor.