Wealth management has been newly added to the syllabus of JAIIB May 2024, Previously we discussed ‘what is management’ here we’ll carry the discussion forward and talk about the importance of wealth management.

What is wealth management?

The importance of wealth management in retail banking is based on its capacity to deliver individualised financial solutions, promote lifelong customer connections, and propel banks’ revenue development.

Investment planning, accounting, tax planning, estate planning, retirement planning, portfolio management, and financial services management are all included in the professional service of wealth management, which wealth managers offer for a defined charge. When these services are offered to enterprises or organisations on an international scale, it is called global wealth management.

Wealth management services typically include investment advice, estate planning, accounting, retirement, and tax services, with fees based on client assets under management (AUM).


Important aspects of wealth management

  1. Clarity of the investment demands should be the priority to establish the direction.
  2. Goods and Services: Being aware of the products and services that are best for you will help you make the appropriate choice to reach your financial objectives.
  3. Advisory Services: By working with experts, you can benefit from their knowledge and experience in the field.
  4. Estate planning is also a crucial component of wealth management because it guarantees and maintains money over a longer period.

Business Structures and wealth management

It is impossible to overestimate the significance of wealth management in retail banking since it enables banks to offer consumers value-added services, foster customer loyalty, and increase revenue.

  • A staff of specialists and experts is on hand at wealth management offices to offer guidance in a variety of areas. A client of a wealth management company might, for instance, have 200 crores of rupees in investable assets and trust for their grandkids. 
  • Wealth management advisors employed directly by investment firms may have expertise in the area of investment strategy, whilst those working for large banks may focus on the management of trusts and readily available credit options, thorough estate plan state planning, or insurance possibilities. 
  • The best wealth management alternatives are provided to their clients by wealth management professionals since they have the best knowledge of investments, market tactics, or portfolio management of anybody.


Process of wealth management

The importance of wealth management in retail banking has grown in relevance in the current, fiercely competitive banking sector because it allows banks to stand out from the competition and add value for their customers.

The following steps are included in the wealth management process: 

  1. Evaluating the client’s present financial condition.
  2. Determining one’s financial objectives.
  3. Creating a solution that is specific to the objectives.
  4. Putting the financial concepts into practice.
  5. Keeping track of the outcomes and reviewing the plans.

What comes under wealth management

  • Asset Allocation Management

This investment advisory is entirely committed to managing investment portfolios with the sole goal of generating income. With a variety of investment types, it seeks to balance the risk.

  • Tactical Management

By selecting the ideal choices and tactics, tactical management assists in determining the suitable techniques to realise financial strategies.

  • Diversified Management

The management team at Diversifier assists clients by offering a model that is adaptable and useful for fulfilling client needs.

Financial institutions may assist their clients in making wise investment decisions, managing risk, and ultimately achieving their long-term financial goals by emphasising the importance of wealth management in retail banking.

Products and services of wealth management 

There are wealthy goods and services on the market, but for convenience and security, people often invest in bank deposits. But wealth management experts do provide a few standard goods and services.

  1. Alternative Asset
  2. Bonds, Corporate Fixed Deposits, Fixed Maturity Plans & Debentures Insurance
  3. Mutual Funds
  4. Systematic Investment Plan
  5. Portfolio Management Services
  6. Real Estate Services
  7. Retirement planning
  8. Strategic Business Strategy
  9. Will Writing

Alternative asset

Alternative assets are non-traditional assets that are not often featured in a regular investment portfolio but have the potential to be economically valuable. Due to these assets’ unusual characteristics, the valuation might be challenging.

  1. Art and Antiques
  2. Precious Metals
  3. Fine Wines
  4. Rare Stamps
  5. Coins
  6. Sports Cards
  7. Other Collectibles



Bonds are fixed-income securities created from loans made to borrowers by investors. The bond’s issuer guarantees that it will pay the investor the bond’s face value at maturity as well as the specified interest rate for the duration of the bond. Like securities, bonds can be traded.

The bond market and its types

The debt securities such as corporate bonds, government bonds and tax-free bonds are traded in the bond market. Unlike equity, the bond is not much volatile and it’s more suitable for investors since it’s associated with a lower risk tolerance.

Bond market investments are a reliable and effective approach to diversifying a portfolio. Bond markets come in two flavours: the primary market and the secondary market. While bonds purchased in the primary market are sold in the secondary market, the primary market is where the original bond issuer sells fresh debt instruments to investors.

The types are as given below:

  1. Convertible bonds: A convertible bond allows the buyer the option to convert it into shares of the firm issuing it, but only at specific intervals throughout the bond’s term. It has a set tenure and makes periodic interest payments.

(A) Regular: The right to convert without obligation is provided by regular convertible bonds, which have a defined maturity date and conversion price. Businesses like releasing them to the general public.

(B) Mandatory: Mandatory convertible bonds have higher interest rates since investors must convert them into equity shares of the issuing business when they mature. Businesses typically provide greater interest rates. 

(C) Reverse: At a predetermined price and maturity, the issuing business may convert the reverse convertible bonds into equity shares.

2. Municipal bonds: Municipal bonds are debt instruments issued by municipal corporations or bodies for socio-economic development, with a three-year maturity period.

Types of municipal bonds:

  1. General obligation bonds: Bonds are repaid from the municipality’s general revenues to finance projects.
  2. Revenue bonds: These are utilised for the generation of funds for particular projects and repayment interest issued to bondholders is processed via revenue explicitly generated via the projects declared in the bonds. They have extended maturity periods of up to 30 years and higher returns than GO bonds.

3. Retail bonds: Retail bonds are a way for companies to raise additional capital by borrowing at a fixed rate from an investor for a specific length of time. They can be bought and sold during regular market hours, allowing investors more flexibility.

4. Government bonds: The central and state governments of India issue bonds to ease the country’s liquidity crisis. They provide consistent returns and are seen as secure since the government guarantees them. Most of the Indian bond market is made up of these.

Types of government bonds

  1. Fixed-rate bonds: The interest rate applicable for these are fixed for the entire investment tenure irrespective of fluctuating market rates. The lock-in term for these bonds is typically one to five years.
  2. Floating rate bonds (FRBs): Floating rate bonds have variable interest rates based on periodic changes experienced by the rate of returns. They can also exist with a base rate and a fixed spread, which is determined via auction and remains stable up to maturity. The best time to buy such bonds is when their rates are low and expected to increase, as the change in the interest rate is heavily dependent on the performance of the benchmark rates.
  3. Sovereign Gold Bonds (SGBs): This scheme allows entities to invest in digitized forms of gold without having to access it in its physical form. Interest generated via these bonds is tax-free. Three days before the bond’s issuance, the average closing price of gold with a purity level of 99 percent is used to calculate an SGB’s nominal value. Liquidity of SGBs is possible after 5 years, but redemption is only possible based on the date of interest disbursal.
  4. Inflation-Indexed Bonds: Inflation-indexed bonds are issued for retail investors and are indexed by the CPI or WP1.
  5. Bonds with Call or Put Option: Investors have the right to buy back bonds or sell them to issuers through call or put options.
  6. Zero-Coupon Bonds: Interest is not earned on such bonds, Instead, investors accrue returns via the difference that exists between the issuance price and the redemption value. They are not generated through an auction but rather using already-existing securities.


An insurance policy is a contract that provides financial protection from the insurance provider against losses to a person or an organisation. The premium is the amount of money that will be charged for a specific quantity of coverage, and the insured receives a contract outlining the terms and circumstances that will determine how much money will be paid to them. It is a form of risk management and wealth planning approach that is used in the financial planning of a person or a business. Where there is a significant or high risk, risk covers are necessary.

Mutual funds

Mutual funds are an investment tool where funds are collected from investors and invested in securities. Fund managers in India are responsible for investing the fund’s capital and producing capital gains and income for investors. They also maintain a structured portfolio to match investment objectives.


    1. Equity Mutual Fund: Mutual funds invest in stock markets, with returns based on stock performance, making them the best type of mutual fund in the long run.
    2. Debt Mutual Funds: These will invest money in debt instruments like Treasury bills, Government Bonds, etc. These investments ensure you a fixed rate of returns.
    3. Balanced Mutual Funds: Investors prefer to invest in both equities and debts to minimize equity risk.
    4. Sectorial Funds: The fund Manager selects stocks based on sector preferences and returns on investments are based on stock performance.
    5. ELSS or Equity Linked Savings Schemes: ELSS funds are exempt from income tax, with a 3-year lock-in period.
    6. Open-Ended Fund: Funds allow investors to invest and redeem money at any time, regardless of circumstances.
    7. Close-ended Funds: Funds with a time-bound investment horizon allow investors to invest with a lock-in period of 1 to 3 years, without being able to redeem it.

Systematic Investment Plan (SIP)

A disciplined investment strategy provided by mutual funds is called a Systematic Investment Plan (SIP), in which investors make regular, fixed-amount investments.. It allows investors to invest a fixed sum of money in a selected scheme at pre-defined intervals.

Systematic Withdrawal Plan (SWP)

SWP allows investors to withdraw a fixed amount at pre-determined intervals, with the amount and frequency of withdrawal being chosen. At the set date, units from the portfolio are sold and funds are transferred to the investor’s account.

Portfolio Management Services (PMS)

For clients with high net worth, a Portfolio Management solution (PMS) is a customized professional solution. PMS provides professional management of an entity’s investments to create wealth, unlike a mutual fund investor who owns units of the fund. Investors in PMS are allowed to customize their portfolios to meet their own financial objectives and personal preferences.

Real estate services

Real estate assets are an integral part of a family’s wealth, and real estate funds are investment vehicles used to invest in real estate projects and linked securities. Some funds invest in bonds/instruments secured by property, as it involves high risk due to volatility in property prices.

REIT (Real Estate Investment Trust)

Real Estate Investment Trusts (REITs) are organisations that own and operate real estate to generate regular income. They manage portfolios and mortgages and generate rental income, which is distributed to investors as dividends. REITs allow small investors to park their funds in real estate.

Retirement planning

Indian Wealth Management focuses on advising solutions to ensure retirement security and cover life risks.

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