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Updated on January 10, 2011

People all over the world constantly look for ways and means of properly managing wealth. The reason for this is purely economical as wealth management is the only way to advance the world economy and our lives at large.


Wealth management is an intelligent use of information by a responsible person to:



Protect, and

Multiply wealth/ investment.

This is usually the responsibility of our investment manager or fund manager as it is usually called by some finance experts.

Financial wealth include: cash, marketable securities, and unused credit lines. This then presupposes that this article is all about cash management, marketable security management and management of unused credit lines.


The aim of cash management is to release cash tied up unnecessarily is a system, this cash management must be an efficient one for it to yield any result, without negatively affecting the company’s profitability stand or risk stand- i.e. not increasing risk (business risk and financial risk). Cash management involves the following steps:

Planning/ estimating cash requirement: the first step in cash management is to make a calculated estimate of the amount of cash required and the time it is required. Two cash management models that can be used are: The Baumol model and The Miller-Orr model.


Baumol model is a cash management model that attempt to establish an optimum cash balances. Baumol is for instance used to decide on the optimum cash inventory levels. Some assumptions are made about the use of cash and the liquidity of marketable securities.

Baumol uses an equation similar to that used to estimate stocks i.e. the EOQ formula for inventory management. The formula is reproduced below:

Q= √2cs/i

Where: S= the amount of cash needed in each time period

C= the cost per sale of securities

i= the interest cost of holding cash or near cash equivalents

Q= the total amount to be raised to provide for S


Miller-orr model is more realistic approach to cash management.

Allocating cash

Providing for cash shortage

Investing the surplus cash




You will agree with me that wealth management like other technically dominated aspects of financial management is not purely guided by technical knowledge.

Certain non-technical knowledge are required and are highly important in the quest to effectively and efficiently manage wealth. Below are some of the general knowledge needed by all wealth managers if they are to make any success in the process of managing wealth.

  • Discipline
  • Communication skill
  • Knowledge of political economy
  • IT knowledge


The success and growth of every economy is strongly hinged on the application of sound wealth management. Wealth does not only have to be financial wealth before it can be managed. Other wealth the wealth managers manage are:

  • Real estate wealth
  • Mortar & bricks wealth, and
  • Intellectual wealth.

The general knowledge required for the management of this wealth are basically the same but, each specific discipline requires its own sets of knowledge. Real estate for instance has basic sets of knowledge that must be possessed by all in other to make meaningful real estate investment decision.

It will be in your best interest to actively seek information in any discipline that you are keen about. Start by exploring other materials in this site.

To your success as a wealth management professional!


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