Asset Management vs Wealth Management

What Is Asset Management?

Asset management is a strategy that seeks to maximize the potential for investment returns from a group of assets owned by an individual or organization. Assets refer to any natural resources that may be capitalized and provide a financial return. This includes stocks, bonds, and real estate. A large firm may use an asset management strategy to achieve its goals, as will a small corporation and even a family. Organizations and individuals who practice asset management hold and care for investments of various types in order to maximize the potential returns. The ultimate goal of an asset management strategy is to achieve better returns than those of competing companies or organizations.

What Is Wealth Management?

Wealth management takes on a broader course compared to asset management, as it is a strategy that seeks to manage all aspects of an individual’s or organization’s finances. Wealth management is a client service which involves advice on investment strategy, portfolio construction, wealth structuring or tax planning for high net worth clients. The wealth management strategy aims to help clients make decisions with their assets by providing them with integrated financial solutions. These include the development of investment strategies, risk management procedures, and allocation of financial resources. In order to serve this segment successfully, wealth managers must have knowledge of not just one industry but several – from banking and insurance to tax strategies and estate planning. They must understand the complexities of building an investment portfolio and must be able to provide advice that meets the complex needs of their clients. Wealth managers are financially literate professionals that perform tasks such as accounting, retirement planning, estate planning, and similar services. They are highly trained in numerous fields related to finance and investing. The ultimate goal of managing one’s wealth is to achieve stability over time through careful investment activity.

Key Differences Between Asset Management and Wealth Management

Asset_Management_vs_Wealth_Management

Focus

In terms of focus, asset management focuses on a group of assets owned by an individual or organization. Wealth management, on the other hand, takes on a broader course as it is a strategy that seeks to manage all aspects of one’s finances.

Services Provided

Asset managers generally refer to individuals who manage investments for others in order to help them achieve financial objectives. They may oversee an entire portfolio or only certain segments of it such as real estate, stocks and bonds. Asset managers usually advise high net worth individuals and organizations with sizable portfolios. Wealth managers serve high net worth individuals by providing comprehensive financial solutions. These investment strategies, risk management procedures, and other services are customized to the needs of each client.

Success Measures

Asset management is successful when managers make better returns than their competitors. Wealth management strategies aim to provide stability over time through investment activity. Their goal is also to help clients meet financial goals and objectives by offering comprehensive wealth solutions. The ultimate goal is helping them achieve stability through consistent investment activity that includes risk management procedures and other types of financial advice.

Management Approach

The difference between asset management and wealth management can also be seen through their approach to investment. Asset managers invest in assets which they believe will appreciate over time, but they don’t go into great depth on the subject. Their interest is usually on making money quickly so that the assets can be sold at a profit. More often than not, they focus more on quick sales rather than long term stability. Wealth managers take a different approach since they work with high net worth individuals who are looking for non-liquid investments that will offer long term stability. These solutions may include real estate or annuities, as well as other strategies that seek to ensure uncompromised returns over time.

Compensation Terms

Asset management is compensated through commissions whilst wealth managers usually take a fee based approach. The reason for the difference in terms of payment is due to the fact that asset management is geared towards selling products rather than just offering financial advice.

The Bottom Line

As you can see, there are many distinctions between asset management and wealth management. Asset management focuses on maximizing profitability, while wealth management focuses on providing clients with multiple services related to finance and investing including guidance on creating an investment portfolio, offering risk-management procedures, tax planning, etc. However, both disciplines offer financial security to individuals who have amassed large amounts of capital over time. Some advisors take on both roles, but it is also common practice for wealth managers to focus their efforts only on the wealthy segment while leaving all other tasks up to an asset manager. A professional investment advisor can help you reach your short term and long term financial goals by taking into account your risk tolerance, current savings, investment income capacity, financial goals, and other variables.

Asset managers invest in assets which they believe will appreciate over time, but they don't go into great depth on the subject. Their interest is usually on making money quickly so that the assets can be sold at a profit. More often than not, they focus more on quick sales rather than long term stability. Wealth managers take a different approach since they work with high net worth individuals who are looking for non-liquid investments that will offer long term stability. These solutions may include real estate or annuities, as well as other strategies that seek to ensure uncompromised returns over time.
Wealth managers are generally compensated through fee-based methods rather than commissions. The reason for this is because asset managers are in it to sell products, while wealth management focuses on providing financial advice.
Find out how long the advisor has been practicing as well as their experience level and background in the industry. It's important that you feel comfortable with your advisor since he or she will be working closely with you on a financial planning strategy for years to come. Also, look at their certifications and affiliations to make sure they have been properly vetted.
You can do this by working with a financial advisor to create an investment portfolio that will help you reach your short term and long term financial goals. A professional investment advisor can take into account your risk tolerance, current savings, investment income capacity, financial goals, etc. in order to create the best plan of attack for building wealth.
The best choice would be to work with a wealth manager if you have a high net worth. If your financial situation is more modest, it may make more sense to go with an asset management strategy in order to get a strong return on your investment quickly.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.