1. WEALTH & ASSET MANAGEMENT IN TOUGH TIMES
BY
AKINWUNMI OLUFEAGBA
2. OUTLINE
Introduction
The Economics of Wealth Creation and Management
Life Cycle and Financial Planning
Opportunity and Risk Identification
Navigating the TougherTimes
Conclusion
3. Introduction- investing
Investing is the act of seeking value at least sufficient to justify the amount paid. Consciously paying more in the
hope that it can soon be sold for a still higher price should be labeled as speculation- Warren Buffet
Investing is an act of faith, a willingness to postpone present consumption and save for the future.We entrust our
capital to corporate stewards in the faith- at least with the hope that their effort will generate high rates of
return on our investment- John C. Bogle
4. …..Introduction- What is wealth management?
Wealth management is the most advanced form of financial planning services
Wealth managers typically create tailored investment strategies and plans to help their clients manage their assets
In the strictest definition, wealth management is for the high net-worth individuals (>$1M)
Think about wealth managers as the surgeons, and the financial planners as your family doctors/general practitioners
Wealth management involves more specialized tax planning, wealth growth and protection, estate and succession
planning
Financial planning includes- income, income-tax, insurance and health, investment and wealth, retirement and
estate planning
5. The economics of wealth creation and management
GLOBAL CONDITIONS
Activity
• Output
• Income & Expenditure
• Foreign Trade
• Credit Volume
Cost
• Inflation
• Interest Rates
• Exchange Rates
Financial Markets
• Equity Market Alternative Investments
• Fixed Income Market
Economic and Social Development
• Changes in Structure of Output
• Competitiveness - Global Competitive Index
& Ease of Doing Business
• Inequality
• HDI
POLICY
Fiscal, Monetary, Regulatory Conditions
6. The economics of wealth creation and management- what are the odds?
-Inflation & Exchange Rate-
Value erosion is at the heart of poverty in Nigeria
Win that battle, and you increase your chances of financial success
Inflation in Nigeria averaged 11.93% between 2010 and 2020, for a cumulative 131.23%, and compounded at 245%.
Your investment in 2010, needs to grow by 245% to break-even in 2020. If you invested N100,000 in 2010, you need to have
N345,000 by 2020, otherwise, you’ve lost money. That doesn’t account for the risk taken on the investment.
At the end of 2020, Naira was worth just 39% its value in 2010 relative to the USD
During this reference period, the NSE-ASI returned 64%
That means your N100,000 invested in the NSE-ASI in 2010 will be worth N164,000 at the end of 2020- that’s 47.5% of the amount
needed to breakeven.
7. Improving the odds- Life cycle and financial planning
Life cycle-
Phase 1: 0-20 – Birth & Education ( most already work part-time by 16)
Phase 2: 21-60 – EarningYears
Phase 3: >60 – Retirement (life expectancy about 80 years)
Ideal Life cycle- Nigeria (Adjusted for life expectancy)
Phase 1: 0-20 – Birth & Education
Phase 2: 21-56 – EarningYears ( Life expectancy 56 years)
16%
49%
35%
Life Cycle- Advanced Economies
Phase 1
Phase 2
Phase 3
36%
64%
Life Cycle- Nigeria
Phase 1
Phase 2
9. …..Financial planning
Develop well defined goals
Divide the goals into short and long term
Analyze current income, expenses and savings
Map out well defined strategies to turn the goals into reality
Review periodically, rinse and repeat
10. …..Steps in financial planning
Identify the investment objectives
Needs and requirements of the investment objectives
Determine the required returns to meet the financial objectives
Determine your individual risk tolerance
Design an asset allocation to meet the risk tolerance and returns
Modify asset allocation based on any change in needs or risk tolerance
11. Opportunity and risk identification- Research your investment
Examine historical trends
Perform financial analysis
Compare with the peer group
Obtain relevant economic news- identify emerging risks
Forecast future performance
View expert recommendations
12. …….Opportunity and risk identification- Sector selection
Fastest growing- identifies emerging trends
Largest sectors- indicator for established industries
Resilient sectors- exhibit the least variation in growth rate, safest to invest
Tactical opportunities- every season presents unique opportunities, be ready to take advantage
13. Navigating tougher times-What are the emerging risks?
Global conditions- head or tail wind
Domestic conditions-
Policy
Activity
Cost
Financial markets
Socioeconomic developments
14. Conclusion- Do’s and don’ts of investing
Do stay informed of your investments
Do understand the advise of experts before taking it
Do invest long term- it’s a marathon, not a sprint
Do compound your investments, if possible invest a fixed sum monthly
Don’t buy what you do not understand
Don’t panic, you don’t lose till you sell