Money management is important for anyone who is earning a decent salary and wanted to accumulate wealth to achieve financial goals. The biggest problem is not all of us are financial experts. If you don’t do it right, then all your hard work will be for nothing. This is why it is important to find the right financial advisor to ensure your efforts help you achieve what you are seeking. But the biggest issue is there are a large number of financial advisors available in the market. Finding the right one is not as easy as you think. There are different types of financial services are provided by these financial advisors. Two of such services are asset management and wealth management. But we tend to use these interchangeably without knowing the difference between them.
Today with this article, we will help you differentiate how wealth management is different from another.
Asset Management
Asset management refers to the management of asset(s) or group of assets such as stocks, commodities, mutual funds, fixed-income, and so on. The asset managers manage investment assets on behalf of others. The main idea behind asset management is to increase the client’s investment portfolio over time while mitigating risk.
The asset manager’s work profile consists of finding the right investments to make or avoid, that will help the client’s portfolio grow and accumulate wealth over the long term. This includes fundamental and technical analysis, in-depth research, analyzing market trends, and performing anything that helps with asset appreciation.
Asset managers also practice rebalancing investment portfolios to maximize the returns on investments made, while mitigating the risks as much as possible.
Asset management institutions are completely different from brokerage houses. It is because of the higher level of standards in asset management institutions as the asset managers have trading powers over clients’ accounts. If the asset managers failed to meet the client’s expectations, then there is a higher possibility that they may face criminal liability. As a result, the asset managers charge fees rather than commissions, which also tend to be higher than the brokerages.
Wealth Management
As you have seen above, asset management focuses on the investments, wealth management focuses on the broader category, looking at the overall financial goals of the entity and take necessary steps to accumulate wealth over the long term.
Therefore, wealth management is not limited to the management of assets but also tax planning, insurance, education planning, retirement planning, and so on. In simple words, wealth management is very simple. It involves the management of one’s financial situation. Due to this, the wealth managers are not limited to providing advice over the asset type but to deliver in a consultative manner. It means, a wealth manager is completely client-centered and guide any financial asset or service that is appropriate for that specific individual.
Generally, wealth managers are experts in providing services in any financial field, but certain wealth managers specialize in specific areas of finance as per their expertise level.
Conclusion:
We can say that asset management and wealth management are not quite different from one another when it comes to managing finances. However, the types of services you opt for, certainly determine the outcome of your investments. Therefore, it is important to decide on the service type based on your financial goals. You do not want to hand over all your wealth to a financial advisor, similarly, you would not like to ask your wealth manager about investments to make.
