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Asset management vs wealth management: what are the key differences?

A savvy way to take care of your money is to put it to work through investments. Investing is a prudent financial act. When you invest, you ensure that you have enough money set aside. Emergencies, holidays, and pensions are just some of the things investing covers.

You can have a very healthy accumulation of money, however, you ought to consider seeking professional help to manage your funds. This is where asset and wealth management can be very useful.

Asset management in a nutshell

Asset management is about intentionally increasing wealth through investment trading. Assets from investment trading are highly likely to appreciate over time. Typical investment products include bonds, commodities, stocks, real estate, and mutual funds.

For organizations, asset management is about making the most of your physical assets. A dedicated asset manager in a company helps to achieve organizational goals.

How asset management companies work?

Asset management companies open accounts on behalf of their clients. Institutional clients typically include universities, multinational corporations, and pension funds. Individual clients are usually wealthy entrepreneurs and technopreneurs. Once your account is open, you deposit money into it. The asset management company then puts your money into an investment. As a result, this fund will generate more returns than an ordinary savings account.

Your account also comes with many perks. For instance, account holders have access to credit cards, check-writing privileges, and margin loans. In addition, if a client has other financial needs, an asset management company can also address these. By offering customized financial advisory services, asset management companies prove their value. Advice may include referring the client to an outside financial expert.

The key competitive advantage of an asset management company is consolidation. You can handle all your financial needs in one place.

What does an asset manager do?

Living your life and managing your assets simultaneously can be an enormous task. For this reason, you should make use of an asset manager. Ideally, you want an asset manager to develop a comprehensive financial plan for all your needs.

Asset management has twin goals; it carefully handles risk and maximizes investment value. An asset manager keeps these goals in mind as he or she helps his client. In addition, the goals of a client will help the manager to determine their relationship to risk.

The investment in your portfolio should reflect your appetite for risk. A good asset manager bears this in mind. For example, if your risk tolerance is high, you might be a more daring investor. As a result, you can afford to wade into the pool of investment offerings that tend to carry more significant risks. Your asset manager accounts for this when making investment choices on your behalf. Conversely, if you have a low tolerance for risk, you tend to shy away from wild investments. A good asset manager is sensitive to this fact and will use it to guide investment decisions on your behalf.

When choosing your asset manager, don’t forget to consider their qualifications. An asset manager is usually a Certified Financial Planner (CFP) who has undergone rigorous training. Their certificates can withstand even the most thorough fiduciary scrutiny. A good asset manager is principled and is committed to their fiduciary duty. This duty legally binds them to put your needs first.

Wealth management in a nutshell

Wealth management addresses the needs of affluent clients, and it involves a combination of financial services. For example, estate planning, investment management, and tax guidance are usually part of wealth management. Occasionally, wealth management involves giving legal advice. However, when it comes to advisory services, wealth management is the cream of the crop. That is because it offers very detailed levels of financial planning.

How wealth management companies work?

Wealth management usually starts with an assessment of your financial circumstances. Next, wealth management companies may want to conduct a financial forensic investigation. It means the company will look at your bank accounts and any loans you might have.

Your designated wealth manager would also have detailed consultations with you. These sessions would help the manager get a clear picture of your financial goals. A suitable management plan is then created, implemented, and monitored.

Wealth management takes a holistic investment approach. This approach is what makes it the cream of the financial crop. A good wealth manager treats their client’s fiscal life in a 360-fashion. Let’s take a widower, for example, who would be a typical client of wealth management services. He has children and grandchildren and wants to ensure they are provided for when he is gone. So, a wealth manager would invest the widower’s money in different profit-bearing funds.

The wealth manager could also offer suggestions about trust management. The widower may very well want advice on estate planning and tax guidance. A wealth management company readily provides all these services. In addition, wealth managers may have detailed consultations with other service professionals in your life.

The accounts involved in wealth management services are quite large. For this reason, wealth managers often tend to adopt a collaborative approach. So, for instance, the wealthy widower probably already has a lawyer and an accountant on deck. The wealth manager will keep in touch with these folks. He will want to be sure that everyone puts the widower’s goals at the top of the list of priorities.

The implementation of a wealth management plan means that systematic analysis occurs. At this point, the wealth manager carries out regular follow-ups with you. These follow-ups ensure that you are both still on the right track.

Wealth managers also use these sessions to develop closer client relationships. This relationship is how they will find out if there are any other services – like estate planning – they can offer to their client. Ultimately, wealth management companies seek to build lifelong, quality relationships with you.

Key variations between asset management and wealth management

The amount of risk you can tolerate in asset and wealth management is relevant. A client’s appetite for risk is a deciding factor in the types of investments made. Both types of client management also consider your financial goals and objectives.

A critical difference between asset management and wealth management is, well, you. Your level of income and your desired financial goals make all the difference. The type of clientele that seeks asset management services tends to be middle-class. For instance, you can begin to use asset management services if you have an annual income of £100,000.

Wealth management companies often deal with extremely wealthy clients. Here, you’re looking at having an annual income of at least £250k. Wealth management services get even pricier in some instances. On the high end, having investable assets worth as much as £1 million is a necessary starting point.

Another significant difference between asset management and wealth management is exposure. If you use an asset management service, there is the possibility that your asset basket exposure might be narrow. Conversely, your asset basket will have a broader exposure with a wealth management service.

Payment for asset management and wealth management services

Pay close attention to the fee structure attached to both asset management and wealth management services. You don’t want to see a lifetime’s worth of wealth eaten up by service charges.

A fee-only pay structure is the best way forward. For example, financial planning managers can sometimes get compensation for selling certain products to you. Using the fee-only structure should prevent this situation. However, make sure that they are also responsible in a fiduciary way. This will legally bind them to put your needs ahead of their own.