What is a Private Client Group and How Do They Allocate Assets?

If given a choice, would you prefer a ready-to-wear suit or a bespoke one? Most of us would choose the latter for one simple reason: customization to meet our needs. In the world of wealth creation, such a professionally customized portfolio service is termed a Private Client Group.

This service is offered by banks or professional advisory groups and provides an exhaustive collection of research-based advisory services tailored to each client’s needs. It is an exclusive service designed to fulfill the exceptional investing requirements of privileged customers or high-net-worth individuals with capital of 25 lakhs and above.

The basket of investment options can include equities, derivatives, mutual funds, IPOs, or a combination of these asset classes to maximize market opportunities. The achievement of specific goals is facilitated by optimal asset allocation, which depends on two broad factors:

Time: The primary factor is the time frame within which the investor seeks to exit. If an investor has a long-term horizon, they can opt for higher potential returns with a potentially higher risk. Conversely, for a short-term investor, investment choices must be evaluated based on market volatility.

Risk Tolerance: Risk tolerance determines the extent to which the portfolio can withstand risk. This can be assessed based on the investor’s economic/financial ability to tolerate risk and their emotional/psychological capacity to handle the unforeseen.

The major objective behind asset allocation is to mitigate losses arising from one asset class in the portfolio with gains in another. In short, the portfolio of such superior clients is well-equipped to handle risks in the form of a bear market or any sector-specific recession.