Let us unveil the key points of differences covering Asset Manager Vs Wealth Manager. We would cover the scope of differences between asset management and wealth management while we also cover the concepts between the two. Read on!
Introduction
Not many are aware of the fact that ‘asset management’ and ‘wealth management’ are two acronyms that are used interchangeably in the investment world.
However, these two terms are different and can be used widely covering the scope of interaction and different functionalities covering finances and investments.
On this note, let us understand key points of differences covering asset manager vs wealth manager.
What is asset management?
Asset management refers to a set of principles that encompass robustly maintaining your investment portfolios.
You may require the services of a financial asset manager to take care of your investment products comprising stocks, bonds, mutual funds, etfs, and much more.
This way you can grow your wealth basket effectively to plan for a prosperous and sustainable future. It would be your asset manager who assesses your overall risk tolerance and makes a thorough analysis of risk profiling on an independent scale. This way, your asset manager determines your overall net worth vis-a-vis the level of risk appetite you are capable of handling under your belt. Better portfolios maximize returns on investments afterall.
It is typically your asset management consultant or advisor who helps you through managing investments on a hassle-free note. They help you get your asset allocation done and help you choose how to divide your investments amongst different asset classes. Asset management firms can also help you get this done.
It is your asset manager to determine what percentage of your investment portfolio must comprise growth products like stocks and equities. And, further, evaluate what percentage of your investment portfolio may include fixed-income products like bonds or fixed-income securities, or fixed annuities.
What is wealth management?
While asset management helps you manage your investment portfolio, wealth management encompasses broader aspects of managing your investments vis-a-vis maintaining your wealth basket that can secure your overall sustainability and guarantee you a future that you had always dreamt of.
In a nutshell, wealth management encompasses a broader view of protecting your financial situation and taking the necessary steps to protect your wealth for further years down the line.
Therefore, wealth management refers to the broader aspect to protecting your income levels and helping your wealth grow.
These are the types of services you can expect from wealth management:
a. Tax planning
b. Insurance services
c. Wealth planning
d. Legacy planning
e. Estate planning
f. Retirement planning
g. Education planning and much much more!
While asset management focuses on meaningful investments and portfolios for the clients, it is wealth management that holistically looks at wealth generation aspects for the clients.
In a nutshell, wealth management aims to protect investor’s wealth on a long-term scale. And, asset or wealth management firms play a significant role in shaping the overall financial landscape of investors.
Asset Manager vs Wealth Manager: Key differences explained
Let us understand the key points of differences covering asset manager vs wealth manager. Helping you get started here:
1. Financial goals or objectives
An asset manager helps you determine what type of investments or financial products you can keep adding to your investment portfolio. He makes an overall risk-profiling assessment to decide what type of investment products are you capable of handling under your belt. He then discusses further plans on how you can build your investment basket right there from scratch.
On the other hand, a wealth manager helps you maintain the investment portfolios you have on hand. They help you garner wealth consistently while helping you sustain investments that can help the curve progress on a steady note. Therefore, wealth manager aims to help you sustain your wealth levels on a consistent note.
2. Scope of functionalities
An asset manager performs the following functionalities for his client:
a. Growth Investing
Here the asset manager helps differentiate between what are like assets generating growth and what are fixed-income assets. He helps you with asset allocation so that your portfolio grows significantly.
b. Income investing
The asset manager helps you decide what type of investment options should you choose so that you receive a steady source of income consistently.
c. Value investing
An asset manager further helps you identify what investments can be procured from market places for cheaper and later sell the assets for higher prices or at profitable values.
d. Risk managing strategies
An asset manager helps his clients mitigate risks on investments by helping them deploy a variety of investment diversification strategies like hedging or leveraging investments belonging to different asset classes.
Let us now have a look at the scope of functionalities that pertain to that of a wealth manager:
a. Investment management
A wealth manager assesses the type of investments you may hold inside your wealth basket or not. Financial planning in terms of investment management is done so that you maintain your portfolio intact and garner returns from the portfolio on a long-term basis.
b. Retirement planning
The wealth manager exactly how to diversify your assets into profitable ventures and helps you profitably plan your retirement finances. This is done after calibrating your assets under management.
Here, he helps you choose those investments that are relatively risk-free and do not wipe out your hard-earned money as these are the life-savings you may have achieved by working hard over the years.
Therefore, capital preservation is something your wealth manager will help you look for while maintaining your retirement-based portfolio.
c. Estate Planning
A wealth manager effectively plans your estate finances and bifurcates income proceeds amongst kith and kin in case you meet up with the death of the owner.
You may need a legal planner or an estate advisor to divide the proceeds of property amongst the nearest surviving family members and the disputes arising thereon be settled amicably.
It is the estate planner or wealth manager who takes care of legal issues arising from the property division.
d. Education funding
The wealth manager manages your income generation portfolios effectively so that you can plan education-related expenses for your sons or daughters.
As the corpus is huge, wise investment decisions have to be made so that you do not lose your portfolio owing to market volatility. And, it is the wealth manager who helps you sustain your wealth basket on a consistent level.
e. Tax planning
A wealth manager helps minimize the investor’s tax burdens by carefully evaluating the income you earn on your investment portfolios.
He may convert income proceeds into capital gains so that lower tax slabs be applied to them as such.
f. Insurance
A wealth manager identifies lucrative insurance schemes where investors can park their deposits or funds. This way, you can protect the client’s investment portfolios while allowing them to garner wealth too.
Suggested Reads: Difference Between Financial Planning and Wealth Management
3. Clientele
An asset manager caters to institutional as well as retail investors on the whole. They cater to pensioners, retirees, high-net-worth individuals, and middle-class retail investors who diversify their investment portfolios.
While a wealth manager deals with high-ticket investors that need wealth managing on a more comprehensive scale. These activities include retirement and estate planning, deriving profitable tax strategies, and managing complex investment portfolios on the whole.
4. Fee structures
An asset manager thrives on a base salary that is camouflaged with performance-related bonuses. This is based on the success ratio of the investment portfolio.
On the other hand, the type of fee structures and compensations you provide for a wealth manager may significantly vary. A wealth manager can claim the following types of fees or compensation benefits.
These are for:
- Providing advisory services
- Brokerage fees
- Potential bonuses for client retention and portfolio growth
How do you find the right Asset and wealth management services?
Deciding asset management vs wealth management is done after having a thorough analysis of your immediate financial needs or your long-term goals on the whole. This is because asset management and wealth management encompasses different levels of portfolio management on the whole.
If the services pertain to choosing someone who is in charge of your investment options and helping you pick bonds, equities, or mutual funds it is the asset manager or an asset management company that you must be looking at. A financial advisor is also someone whom you get in touch with in this regard.
For more comprehensive and long-term financial objectives like wealth preservation, estate planning, or education funding, you look for the services of a wealth manager who can help you put your best foot forward.
Through a fleet of client testimonials or having a word with friends or business colleagues who have worked with different asset or wealth managers, you would be able to zero in on the right one that fits your line of operations too.
The Bottom Line
Choosing the right financial partner to help you retain your income-generation objectives or wealth-preservation needs is something you can distinguish after a thorough level of analysis.
While an asset manager may help you choose different types of financial products you keep adding to diversify your portfolio, it is the wealth manager who helps you achieve more comprehensive results for larger-than-life aspects. These are for purposes like tax planning, estate planning, or capital preservation portfolio services to name a few.
Therefore, you must choose a partner to help you with immediate as well as long term financial goals you have in mind!
