Private wealth is essentially the collection of assets and resources owned by individuals, families, or private entities. This is no small collection of antique art and second homes, though: private wealth is a cornerstone of modern economic systems, with the accumulation, management, and transfer of private assets capable of influencing broader economic dynamics.

The term “private wealth” encompasses a whole host of assets, but the most common ones fall into a few categories.

Financial assets such as stocks, bonds, and cash. These are easy to buy and sell, so they often play a large part in wealth management strategies.

Real estate includes residential homes, commercial buildings, and land. This category makes up a major chunk of the value held in private wealth. Real estate is nowhere near as flexible as financial assets, but it’s sought-after as it often appreciates over time.

Business ownership is common among holders of private wealth, as equity can amount to significant stores of wealth. This can range from small family-owned businesses to bigger private corporations.

Alternative investments include investments like art, collectibles, commodities, and hedge funds. Investors explore these assets because they can offer significant returns and are often not directly correlated to mainstream markets, meaning they can hedge against certain economic outcomes. Although in exchange, they come with higher risk and complexity.

Wealth managers use a range of strategies when working with private wealth clients, in an effort to protect (and ideally grow) a portfolio while minimizing risks and tax liabilities. There are some techniques that are most common, though.

Professional investment management involves managing investment portfolios by monitoring markets and trading certain assets. The goal will depend on the client: the portfolio manager could be tasked with an aggressive approach to increase returns, but more often, the guidance is to protect the underlying wealth and achieve modest but stable increases over time.

Financial planning is as it sounds: professionals craft comprehensive plans for clients, outlining financial goals and the steps needed to achieve them. This often has a specific milestone or goal at the center, which could range from retirement planning to saving for education to estate management.

Tax planning refers to the precise use of certain tax-advantaged accounts and investments to minimize tax liabilities.

Estate planning in isolation refers to the management of an estate during an individual’s life and after their death. The estate refers to an individual’s entire collection of wealth, and an owner will be encouraged to set up wills and trusts to make sure their wishes are held after death – as well as helping to lessen tax ramifications and legal complications.

That touches on a crucial aspect of private wealth: how it’s transferred across generations. “Legacy planning” ensures that wealth is passed on efficiently and according to the owner’s wishes. Besides trusts and wills, individuals can often contribute to charity during their lives and after death. Besides regular donations, many high-net-worth individuals choose to set up foundations or schemes related to causes close to their hearts. To make philanthropy even more appealing, there are plenty of tax benefits and reputation-boosting aspects that come with doing good.

Both the accumulation and distribution of private wealth have significant implications for the economy and society at large. Wealthy individuals or groups often fund businesses and investments, in turn spurring on economic growth. However, there are negative effects on an economy associated with private wealth, too. Disparities in wealth distribution can lead to social and economic inequalities, which is why policies related to tax, inheritance, and wealth management are often controversial and subject to public debate.

Private wealth is a complicated concept: it touches on personal finance, investment themes, business creation and management, tax, and economic policy. For wealthy individuals and groups, effective and strategic financial planning can lead to financial security, portfolio gains, and the achievement of long-term goals. Although as the economic landscape evolves and the world’s very wealthiest continue to accrue more assets, government policies related to legacy planning will be key in making sure that wealth serves both individual aspirations and the wider society.