Wealth management refers to how you plan and manage your money to protect, optimize, and build wealth.
Having a solid financial plan, especially with the current economic condition, is essential.
According to Statista, the wealth management in Kenya is expected to grow significantly in the coming years.
Both in Financial Advisory services and Assets under Management whose growth trajectory will result in market volume of US$8.83bn by 2028
In this guide, we shall be looking at various ways to safeguard
and grow your wealth by applying effective management strategies.
In addition, we shall explore the significance of effective wealth management,
i.e., financial goals, investing, etc.
For instance, diversifying your portfolio
and staying informed about market trends
will empower you to make informed decisions and mitigate risks.
So whether you are a beginner in the journey of building wealth
or just looking to enhance your existing financial strategies,
then this is for you
Since effective wealth management is no longer a luxury,
it would be better if you took a step to safeguard
and grow your hard-earned wealth.
Let’s get started.
But firstly….
The Biblical Principles for Wealth Management
a)Financial Stewardship.
Psalm 24:1(NIV)
“The earth is the Lord’s, and everything in it,
the world, and all who live in it.”
We have to acknowledge that God is the owner of everything.
God has only entrusted us with the resources we possess.
We can only shape our perspective on wealth
when we understand that we are stewards of God’s blessing.
A good steward, therefore, needs to manage resources with responsibility and integrity.
You do not need to focus on personal gain
but should consider using that wealth to further God’s purposes and bless others.
b)Financial Responsibility
Proverbs 21:5(NIV)
“The plans of the diligent lead surely to abundance,
but everyone who is hasty comes only to poverty.”
We have to carefully plan and budget for our finances.
When we budget, save, and invest wisely,
we are exercising financial responsibility.
A budget helps us track our income and spending,
ensuring that we allocate resources well.
Also, setting financial goals can be a motivation
for saving and investing for the future.
c) Generosity
2 Corinthians 9:7 (NIV)
“Each one must give as he has decided in his heart,
not reluctantly or under compulsion,
for God loves a cheerful giver.”
We are supposed to give back to God and others willingly and with joy.
Tithing, charitable giving, and acts of kindness are ways of showing generosity.
This means we participate in God’s work of blessing and transforming lives
In addition to benefiting others,
generosity brings joy and fulfillment to you as a giver.
d)Contentment
1 Timothy 6:6-7 (NIV)
“But godliness with contentment is great gain,
for we brought nothing into the world,
and we cannot take anything out of the world.”
True wealth is found in God.
Finding satisfaction in God rather than in material possessions
helps us avoid greed and excessive consumption.
Financial goals are essential for building wealth.
But contentment reminds us that true wealth is found in our spiritual walk
with God and our sense of purpose.
8 Ways to Safeguard and Grow Your Wealth Effectively
a) Setting Financial Goals for Wealth Management
Goals provide direction and purpose for your financial decisions.
These help us allocate resources efficiently and make informed decisions.
Your objectives could be buying a home, planning for retirement,
or simply building wealth.
But you have to define your goals, prioritize them,
and tailor your wealth management strategies accordingly.
b) Create a “you” budget and track your expenses
A well-planned budget will give you power.
You will be able to make informed choices that align with your financial goals.
When you track your spending habits,
you can easily identify areas where you can cut costs
and redirect the funds toward wealth-building activities.
c) Make Investment a Cornerstone of your Wealth Management
You can only build wealth by investing.
To allow the assets to grow over time,
you need to understand your risk tolerance and have a time horizon.
These will help in choosing appropriate investment vehicles,
i.e shares, mutual funds, real estate, etc
Diversifying and allocating assets are major principles
for managing risk while seeking growth.
d) Keep your investment portfolio diverse.
You have to spread your investments across various asset classes
and sometimes offshore to reduce risk.
Well-diversified portfolios help mitigate losses during market downturns.
They also provide more consistent long-term returns.
e) Manage your Debt
and Reduce your Financial Risk
High-interest debt can easily erode your wealth over time.
It’s necessary to pay down debts efficiently.
Always prioritize debt reduction, with a focus on high-interest loans.
This helps to free up resources for investments and savings.
Maintaining an emergency fund
and having adequate insurance coverage can reduce financial risk
and protect your wealth.
f) Estate Planning and Wealth Transfer
Estate planning ensures that your assets are distributed
according to your wishes upon your passing.
It also helps minimize tax liabilities and administrative costs.
Proper estate planning helps preserve your wealth for future generations.
You can create wills and trusts
and designate beneficiaries for your assets.
g) Tax Planning and Optimization
Taking advantage of tax deductions
and credits can significantly impact your after-tax returns.
This enables you to retain more of your wealth
A well-structured tax plan will save you substantial amounts over the long term.
h) Consult a financial advisor or wealth management firm
(Prov. 11:14 NIV).
“For lack of guidance, a nation falls,
but victory is won through many advisers.”
This clearly tells us why we may need to seek the opinion of other people
when we are likely to make financially sound decisions.
Financial professionals provide valuable expertise
and guidance in navigating complex financial matters.
They help you develop a personalized financial plan
and advise on appropriate investments.
Also, they help you stay up-to-date on financial markets and tax laws.
Wealth Managers
Are professionals who provide comprehensive financial planning
and investment management services to individuals, businesses, families, and institutions.
Their main job is to help clients grow
and protect their wealth while they achieve their financial objectives.
Here’s an overview of what wealth managers do,
their qualifications, where to find them in Kenya,
and the typical fees they charge:
Wealth Manager’s Duties and Responsibilities:
i)Financial Planning:
Work with clients to create personalized financial plans that include ;
- financial goal setting,
- budgeting,
- and estate planning.
ii)Investment Management:
Create and manage investment portfolios tailored to;
- the client’s risk tolerance,
- financial goals,
- and time horizon.
iii)Risk Assessment
Analyze a client’s financial situation and risk tolerance
to determine suitable investment strategies.
iv)Tax Planning:
Help clients optimize their tax strategies
to minimize tax liabilities while maximizing returns.
v)Retirement Planning:
Assist clients in retirement planning, saving and investing in retirement accounts
such as pensions, RBA (retirement benefits authority),
vi)Estate Planning:
Help clients create wills, trusts, and other estate planning documents
to manage and transfer wealth to dependents efficiently.
What Are the Qualifications for Wealth Managers?
For instance, in Kenya,
a wealth manager’s typical qualifications and designations include the following:
i) A bachelor’s or Master’s degree in finance, economics, or a related field
ii) Chartered Institute for Securities and Investment (CISI)
iii) Chartered Financial Analyst (CFA)
iv) Certified Financial Planner (CFP)
v) Chartered Accountant (CA)
vi) A practice license issued by a regulatory body,
such as Kenya’s Capital Markets Authority (CMA).
Where to Find Wealth Managers in Kenya:
I) Your bank’s wealth management department can help you find a wealth manager.
2) Independent financial advisory firms that specialize in wealth management
can also provide personalized services
3) You can find wealth managers in your area by using online directories and LinkedIn websites.
4) You can also ask for recommendations from friends, family, or colleagues
who have used the services of wealth managers in Kenya.
Fees Charged by Wealth Managers in Kenya 2023
The fee structure usually varies, as follows:
1) Percentage of Assets under Management (AUM)
Most wealth managers will charge a percentage of the total assets they manage for you.
The fee typically ranges from 0.5% to 2% of AUM per year,
depending on the investment flow.
The higher the investment flow, the higher the charges.
2)Fixed Fees
In some cases, wealth managers may charge a fixed fee
or a retainer for their services based on the evaluation of assets being managed.
This can happen regardless of the assets under management.
3)Hourly Fees
Some managers will charge by the hour for the financial planning
and advisory services they offer you.
4)Annual fees
Other managers may provide you with an annual rate that covers the services they provide during the year.
5)Hybrid fees.
Some wealth managers may make their fee structure comprise both AUM and hourly rates.
6) Commissions.
Wealth managers may earn commissions on the financial products they recommend,
such as mutual funds or insurance policies.
But this can create potential conflicts of interest;
hence, it’s important to clarify how your wealth manager will be compensated.
What to Look for in a Wealth Manager
a)Their Qualification
You need to know their educational background and work expertise in wealth management.
b)Track record
This will enable you to know the past performance of the wealth manager.
c)Reputation
Reputation is everything when it comes to wealth management.
Look for the best to avoid losing money.
“When selecting and working with your wealth team,
it is vital to bring on only members who have the heart of a teacher,
not the heart of a salesman or the heart of an “expert.”
The salesman is always chasing a commission
and thinking short-term,
and the “expert” can’t help being condescending,
which is humorous because they likely have less money than you.”
(source: THE TOTAL MONEY MAKEOVER, Dave Ramsey)
5 Elements for DIY Money Management
When you are equipped with the right knowledge, intelligence, and time,
you can also manage your wealth on your own.
Here is a checklist to help you determine if you have what it takes
to do it yourself in matters of wealth.
a) Reading and learning are essential to you.
You have probably been educated by reading books and taking financial courses.
You have a comprehensive understanding of topics
like budgeting, savings, investments, and taxes.
b) You can comfortably set aside time
to review your current financial situation.
If you have been budgeting, tracking your expenses and savings, and taking care of your investments, then you are already a good wealth manager.
c) You can make your financial decisions comfortably.
This can apply when you are just starting on your financial journey.
You may have landed a job or started a business.
However, with enough savings and investments, you can grow your wealth.
d) You understand your risk tolerance as an investor.
Let’s see if you possess the following qualities:
i) Are you okay with the financial decisions you make, no matter the outcome?
ii) Can take on more risk for higher returns
iii) will respond positively even if your investments show a significant decline.
From the Risk Tolerance Spectrum:
If you are a conservative investor,
you may prefer mutual funds and government bonds. which are low-risk.
Stocks and cryptocurrency,
which are high-risk, may favor your aggressive investment options.
e) You know the importance and can plan for retirement
Retirement planning refers to the strategies you have in finance,
i.e., saving, investing, and distributing money meant to sustain you after working full-time.
In addition to your income and assets, future liabilities, expenses, and life expectancy are factored in.
Conclusion; Wealth Management
A meaningful and more fulfilling financial journey can be reached
when we incorporate biblical principles into our wealth management practices.
We can become faithful stewards of the resources entrusted to us by God
if we recognize Him as the owner.
We can use our wealth to build God’s kingdom and bless others.
Again,
Proverbs 3:9-10
Honor the Lord with your wealth
and with the first fruits of all your produce;
then your barns will be filled with plenty,
and your vats will be bursting with wine
As you seek to manage your wealth effectively,
may it reflect your faith and be a source of inspiration
and blessing for others.
“No one would remember the Good Samaritan
if he’d only had good intentions;
he had money, too”.
.
Money was used to empower the good intentions
the Samaritan had for the injured man.
The good Samaritan had to pay someone to look after the injured man.
