Reating a wealth management portfolio for a client
These are the instructions but I might add some things on later ahead. I am still not fully sure.
I have put a link to the book that you should use as one of your references: Investment.pdf
I have also attached brochures that you should use.
I have also attached a document called wealth management plan, which has additional information that you will need and the instructions.
1. Client profile:
a. why is it important to know your customer?
i. KYC know your customers, that means in any relationship in the markets
ii. where a bank or wealth management interacts with a client, they need to have all the detailed information about the client, such as passport, address, circumstances and source of funds.
iii. KYC is a basic principle required by the FCA (Financial Conduct Authority), the regulator for all financial activities in the UK, similar to regulators in the US such as the SEC, the AMF in France or the Bafin in Germany.
iv. Reasons for KYC are:
o AML Anti Money Laundering,
v. o eligibility of the client (the wealth manager or advisor needs to know whether the client is suitable and whether products are suitable for the client),
vi. o understanding of the client, his risk return profile and his expectations etc.
2. what is our strategy?
a. Investment philosophy (one paragraph)
i. Fundamental vs technical
1. We are using both: explain what they are and why using them helps us when creating a portfolio.
b. Investment objectives: use the brochures I have attached
i. S-T, M-T, L-T; value, growth; defensive, moderate, aggressive. Explain the difference and why we are using balanced and not the others.
1. What does choosing to be balances mean in terms of asset allocation, risk and return.
c. Implementation / strategy:
i. depending on the risk return profile on the investment mandate and the opinion about market efficiency, the implementation can either be passive or active. Passive includes the market portfolio, index tracker, ETF etc. It includes different strategies and instruments that are available today for a passive implementation strategy. On the active side the choice is between DIY do it yourself and external manager; giving a mandate to a stock broker, to a management firm, a hedge fund manager or anybody else managing the money on behalf of the client.
1. We are using both. Explain why it is better for our customers, using their risk return expectations and their profile. Explain the advantages and disadvantages.
d. Markowitz theory of diversification and modern portfolio
i. International diversification so the client isnat that much affected by the environmental factors that we cannot control. Explain this as well
ii. Explain that even though we are taking the balanced approach as our basis for creating our portfolio, we are also going to be using the markowitch theory as well. Combination of the both.
1. Explain the markowitch theory on diversification and modern portfolio. What this means about risk, return and asset allocation. How this will benefit the client. How this will help us in constructing the portfolio for the client to their needs.