In over twenty years of wealth management in India and U.S., we’ve met institutional investors, high net worth investors, wealthy families, entrepreneurs, wealth inheritors and wealth creators. We list below some of the wealth management pitfalls that high net worth investors face.

Greed & Fear: Time and again we have seen investors decide to go it alone and then make the mistake of letting greed, or fear, get the better of them at the worst of times. This invariably leads them to buy near the top of the market and sell near the bottom.

Perma Bulls: Some investment management professionals in India are invariably bullish when equities are rising, more bullish when equities are falling and bullish when equities are in a range. Inexperienced investors often make the mistake of believing these salespeople and pay dearly for it. Avoid advisors that are unwilling to give you a real and reasonable assessment of the wealth management environment and have permanent rose colored glasses on.

Investing for Challenge: Investors often confuse investment and speculation. Allocating a small percentage of funds to speculate or play around with, rather than the entire portfolio, is the wise approach. We come across too many instances where investors do not segregate investment funds from speculative funds and this often leads to losses and under performance.

Abandoning the Plan Or Not Having a Plan: Time and again we see investors abandon plans and long term objectives. Wealth management becomes an emotional decision driven by the action the market. Moreover, these are reactive decisions rather than proactive ones. We have seen detailed plans shelved to indulge in short term speculation. Often clients borrow aggressively at market tops and shun the market in times of fear.

Going it alone: One of the biggest mistakes investors make in the area of wealth management India is deciding to do it alone. The belief is that investors can manage the investments on their own. However, outperforming the markets is not an easy task. Understanding the markets, keeping up with financial news, dealing with myriad accounts, statements, and advisors is a time demanding exercise. In the longer run, the investment portfolio or the client’s business suffers.

Portfolio Not In Sync With Risk Profile: Most investors we speak with do not have a formal investment plan, nor do they have an asset allocation framework. Some tell us that they are conservative investors and then we find that their portfolio is made of 90% equities. Many investors do not have a financial plan that aligns with the goals and situation of the family.

Multiple Providers: Often high net worth individuals tend to pick up multiple service providers. This complicates their life, takes time and is an unnecessary decision. They are far better outsourcing wealth management to a competent family office like Wodehouse.

Family Involvement: Not involving family members in the wealth management process leads to dissatisfaction. Unfortunately ten years later one partner realizes that the goals and objectives that he / she is striving towards so hard are not the goals and objectives of the other family members.

Investment Performance Confusion: Many wealth managers in India will purposely provide reports that are confusing and hard to understand for clients, making it very tough to track their performance. Some will overload clients with data and reports.

Absolute Performance: Many wealth management professionals in India believe they are in the business of outperforming the index only. However, from a client’s perspective, an advisor down 35% when the index is down 40% is not adding value.

Neglecting succession/estate planning: Many investors are unwilling to deal with this sensitive issue or keep putting it off for a later time. Unfortunately this can create a situation where the family members are exposed to bitter legal wrangles over sharing of the estate should the unthinkable happen.

Complacency & Overdependence: Often times we see the worst losses result from an attitude of complacency and implicit trust in wealth management providers. Unfortunately, this often leads to service providers taking advantage of the situation.
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Resource Box: Wodehouse Capital are http://www.wodehousecapital.com/ Wealth Managers in India and provide services to high net worth clients, entrepreneurs and small corporations in India. If you are a high net worth investor experiencing sub par performance or dissatisfactory service, contact Wodehouse http://www.wodehousecapital.com/ Wealth Managers India.