Money management refers to how a person handles all aspects of their finances to pay off debt and achieve greater financial stability. Asset management and wealth management are two of the most common forms of money management. Although these two processes have certain similarities, there are also several distinct differences between Asset Management vs Wealth Management.
What Is Wealth Management?
Wealth management is a type of financial planning and investment management process that provides high-net-worth clients with strategic solutions for managing their wealth. This unique discipline incorporates portfolio management, financial planning and various other financial services offered by wealth management firms.
A wealth management advisor has many responsibilities, such as consulting with clients, helping them to identify their goals and recommending a strategy to work toward achieving specific goals in both the short-term and long-term. Wealth management encompasses many different topics, such as investment advice, retirement planning, tax and accounting services, estate planning and legal planning. Wealth management advisors often establish long-term relationships with their clients and help them monitor their progress over time.
How Does It Work?
Wealth management can be highly complex due to the amount of money involved. The process begins with a consultation between a client and their assigned wealth management advisor. The advisor will review the client’s current financial status and determine the client’s objectives and long-term goals.
With this information, a wealth management advisor will develop a strategic plan for maintaining or increasing the client’s wealth based on their unique financial situation, objectives and comfort with certain levels of risk. The advisor will meet regularly with the client to track progress, update goals and determine if additional services are needed.
What Is Asset Management?
Asset management is a systematic approach to the cost-effective developing, maintaining, operating and selling of assets. This service, generally performed by a firm, helps direct a client’s investment portfolio on their behalf. Similar to wealth management, asset management is generally targeted to clients with a high net worth.
With the help of an asset manager, clients can take their money and put it to work in various types of investments, such as bonds, stocks, real estate or private equity. Investments are handled based on an internally formulated investment process to help work toward long-term success.
How Does It Work?
An asset manager’s primary goal is to help clients determine what investments to make or avoid to grow the client’s portfolio. Asset managers may use a wide range of macro and micro analytical tools to determine what financial moves are in the client’s best interest.
Asset managers may recommend investing in equity, real estate, fixed income, alternative investments, commodities or mutual funds. While growing a client’s portfolio, an asset management firm is also responsible for mitigating any risks. In a typical asset management relationship, an investor will deposit cash into a brokerage or money market account. The investment manager has access to and can choose to buy or sell investments as they see fit.
What are the Primary Differences?
The biggest difference between wealth management vs. asset management is the level of focus that each delivers to clients. Wealth management advisors take a broader approach to a client’s financial circumstances to discover the best ways to optimize their wealth and achieve goals and objectives. Asset managers, on the other hand, focus on handling a client’s investments. In addition, a wealth management advisor aims to preserve a client’s finances, while an asset manager works to produce tangible returns on investments.
Which Is Right for You?
While both asset management and wealth management can be beneficial to clients who need help managing their high net worth, working with a wealth management firm is often the preferred option. This is because wealth management firms also offer investment advisors, meaning clients can get the best of both worlds without having to rely on two different companies. Building a relationship with an established wealth management firm can inspire confidence and help ensure that all finances and investments are in trusted professionals’ hands.
Speak To A Wealth Management Firm Today
Both wealth management and asset management are popular options in the market. While the two terms are often used interchangeably, there are significant differences between the two and the choice a client makes should ultimately reflect their money goals.
Wealth management acts as a more comprehensive financial solution that tackles nearly all financial aspects, including financial planning, asset management, tax planning, estate planning and retirement planning. A client in search of an all-inclusive service may be inclined to work with a wealth management firm instead of relying on the limited services of an asset manager.
