When it comes to securing your financial future, money management is vital. Unfortunately, the financial world can be confusing with all of its jargon and titles. This is where having a financial advisor becomes useful. Both asset and wealth management have risen in popularity in recent years, and while they might sound rather similar, they both provide different services. Read on to discover the right service for you.
Wealth management is a consultative process for enhancing a client’s overall financial situation while also protecting their financial wellbeing in the long-term. Wealth managers take a look at a client’s financial aspects, which include the following:
- Account and tax planning
- Legacy, retirement, and estate planning
Wealth managers hold themselves to a higher “fiduciary” standard of care, meaning that they are ethically bound to put their clients’ interests before their own. A wealth manager typically develops long-term strategies that are based around details such as the client’s individual goals, their family dynamics, and their pre-existing financial situation. The wealth manager then produces a plan of implementation, which they closely review over the course of the relationship in order to stay proactive with reaching goals. Compensation for wealth managers is typically based on a retainer fee, but there are also fees for assets under management.
While wealth management takes a broad look at a client’s financial situation, asset management has a much more narrow scope. As the name implies, asset management refers to the management of one’s assets, assets which include financial holdings, ETFs, real estate, stocks, bonds, mutual funds, and other investments. The primary concern of most asset management firms is to maximize the return of a client’s assets as opposed to maximizing their overall financial health. Asset managers decide what investments are best suited to a client’s financial situation, and offer services and suggestions ranging from new investment opportunities, portfolio strategy formulation, asset allocation and more. For compensation, asset managers typically charge commissions or establish a percentage of the assets under management as a fee.
If you’re struggling to figure out which of these services you should choose, it’s important to determine what your goals are. If you’re looking to get into investing but want professional advice, you’ll likely want to consult an asset manager. If you’re hoping to get a better look at the big picture of your wealth, such as financial and estate planning or advice on how to reduce debt, a wealth manager is likely the better option. While finding the perfect advisor for your situation can be daunting, knowing the difference between wealth and asset management is the first step to simplifying your search.