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One of the crucial components in the field of investing is the topic of wealth creation. This topic entails many steps in organizing the fundamental features of a portfolio. The wealth management process provides a straightforward way and approach to managing and building wealth, which will finally help the investor turn ones goals into a reality which is wealth (Wacquant, 2019). In order to achieve this, it is recommended that a wealth management analyst is given the work of analyzing an investment in terms of the resources required, the objectives of the investor, and all the processes required to go through to achieve the end goal of wealth creation.
Being a wealth management analyst at a wealth management firm within Connecticut, the main focus is to determine and advise the firm where accredited investors are located within Connecticut, analysis of the investor households structure, and the investors retirement income composition. The work will also involve suggesting the firm on the most appropriate place to locate the office within the counties of Connecticut and finally making suggestions for wealth management offerings.
To answer all the above questions, as a wealth management analyst, the work will involve analyzing the given data to develop the best regression model the firm can use to locate accredited investors within the state. After analyzing the data provided in the excel format, it was found that accredited investors are located in an urbanized area with more development. Accredited Investors are localized far or near industrial locations.
An accredited investor; is defined as intended to encompass those persons whose financial sophistication and ability to sustain the risk of loss of investment or ability to fend for themselves render the protections of the securities Acts of registration process unnecessary (Wacquant,2019). There are also benefits associated with being an accredited investor, including participating in investment opportunities under commission rules that are not available to non-accredited investors.
Once the potential accredited investors have been located, the next question is to understand their composition and structure. As per the research, it was found that the investors can be individual or institutional. It is better to have both types for maintaining diversity in ownership. The investor structure strategy seeks to use the characteristics of each asset class to help an investor reach his goal. Hence, investors should allocate their portfolios to a combination of individual and institutional classes. The diversification of the portfolio will reduce the risk. The second component is the asset selection decision.
Asset allocation involves picking individual assets within each asset class to make up the portfolio. Investors choose the asset classes based on risk tolerance and financial goals. A general rule of thumb is that the lower the risk tolerance, the more significant the percentage of the portfolio that should be allocated to fixed income. Hence as an investor, the structure of the potential accredited investors should be fascinating.
Another factor to consider as a wealth management analyst is the retirement mix of the investor. From the early years, the retirement mix has been implemented, and as a wealth management analyst, the work will be to come up with the best retirement mix for the accredited investor. After applying various clustering methods, it was found that the best retirement mix for the investor should be in the ratio of 80:20.This ratio coincides with what was discovered by Pareto when he discovered that 20% of the pea pods in his garden yielded approximately 80% of the peas in his garden (Tanabe, 2018).
It is because of this rule that Jill Schlesinger, CBS business analyst and host of Jill on Money, said this Upon reflection, you [may be able to look back and say, You know what, for the forty years that I was an investor, 80% of my returns came from 20% of my portfolio. You are probably not going to know until after the fact, or a period of time, when you can see what that 20% was (Schlesinger, 2020). As a wealth management analyst, it is always advised to look for the retirement income mix to maximize the investors income.
Another area an analyst should look at is the offices location within the state of Connecticut. The area must have a high number of accredited investors, and the investor households structure should also be considered together with the retirement income mix. Through different clustering of the different variables within the data set, it was found that the best place set up the office is ZCTA5 06387. The main reason for choosing the location above is because it satisfies all the above conditions. As an analyst, after doing all the analysis work based on the data provided, it is advisable to suggest to the firms management team the wealth creation offerings as per the findings. It is through this analysis that a suggestion is made to the firm to hire a wealth management company to manage its wealth and ensure proper wealth growth. Wealth management is concerned with the optimal usage and growth of a companys wealth in terms of its overall Asset value.
References
Tanabe, K. (2018). Paretos 80/20 rule and the Gaussian distribution. Physica A: Statistical Mechanics and its Applications, pp. 510, 635640.
Schlesinger, J. (2020). The Dumb Things Smart People Do with Their Money: Thirteen Ways to Right Your Financial Wrongs. Ballantine Books.
Wacquant, L. J. (2019). Making class: the middle class (es) in social theory and social structure. In bringing class back in (pp. 39-64). Routledge.
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