Wealth management is concerned with the overall financial health of clients, including investments, taxes, insurance and retirement planning.
Asset management involves managing assets for clients that have large investment portfolios with the aim of maximizing returns.
Wealth management and asset management are two terms that are often used interchangeably but actually have some differences. In this article, we explain these two financial services, as well as other options that may be available to you.
Wealth Management
Wealth management is a general term used to describe a broad range of financial services. It is the practice of managing the assets of a high-net-worth individual, typically with a minimum investment of $1 million (N710 million).
Because wealth managers work closely with their clients over long periods of time and because they help people manage their investments, you can expect to pay higher fees for this type of service than you would if you hired an asset manager directly (without going through your financial advisor).
Asset Management
Asset management is the process of managing the assets of an individual or organization. It encompasses all of the financial decisions made on behalf of a client, including investing in stocks and bonds, buying real estate, acquiring insurance policies and choosing retirement plans.
Asset management involves managing assets for institutional clients or individuals that have large portfolios, such as pension funds or mutual funds. Investment advisors are often hired by these types of institutions to help them manage their investments so that they can meet their investment objectives while minimizing risk exposure.
Difference between asset management and wealth management
| Wealth Management | Asset Management | |
| 1. | Wealth management is a broader term that covers asset management and private banking. | Asset management is under wealth management |
| 2. | Besides investments, wealth management involves tax planning, estate planning, retirement planning and other financial matters. | Asset managers focus on investment opportunities and allocate client assets to those opportunities based on risk tolerance and goals. |
| 3. | A wealth manager is mainly concerned with the overall financial health of their clients | An asset manager is concerned with the investment performance of their clients’ portfolios |
Is an asset manager a wealth manager?
Asset managers are not wealth managers. While they both manage assets, they have very different approaches to doing so.
An asset manager is concerned with the investment performance of their client’s portfolios and how that performance compares to benchmarks or peer groups. A wealth manager is mainly concerned with the overall financial health of their clients, including managing all aspects of their finances: investments, taxes, insurance and retirement planning.
Related Financial Services
Investment Management
Investment management is a service that is provided by a money manager. The money manager can be an investment advisor, financial planner, private banker or wealth manager. Each of these professionals offers their own unique services and solutions for clients with different needs and goals.
For example, if you are looking for someone to help you manage your money and investments on an ongoing basis, a wealth manager or private banker might be best suited for your needs. These professionals typically charge higher fees than other financial professionals because they are available 24 hours a day.
Private Banking
Private banking is a financial service provided by banks and other financial institutions to high-net-worth individuals. The service includes investment management, financial planning and wealth management. These services are usually provided by a single institution, which may be large.
Private banking is often offered through private banking divisions at larger commercial banks, which may also offer trust services and loan facilities to their clients. The small size of personal private banking units limits the ability of some large institutions to provide this service effectively (particularly in terms of client relationships).
As such, many smaller commercial banks focus on providing wealth management services instead because they have more discretion over the relationship between advisers and clients.
What is the difference between asset management and private wealth banking?
Asset management is a service provided by banks, asset managers and private wealth managers. The goal of asset management is to invest money in assets such as stocks, bonds and real estate.
In contrast to this process-based approach to investment decisions, private wealth banking focuses on the individual client’s needs rather than on processes. Encompassing both traditional banking services as well as financial planning advice offered by an experienced advisor who knows you personally, private wealth banking allows you to build up your assets safely over time while enjoying peace of mind with regards to investments such as savings accounts or bonds.
Why invest in managed funds?
Managed funds typically invest your money across a diverse range of investment options (diversification), which helps manage the risk of your investment portfolio. Because they are diversified, managed funds are able to ride out market changes without drastic ups and downs.
You can invest in a managed fund without having to do the research or management. You also don’t need to monitor how your money is being invested.
Another benefit of investing in managed funds is that it gives you exposure to global markets and alternative assets such as hedge funds and private equity.
Bottom line
It is important to note that there is a difference between asset management and wealth management. Asset managers are usually focused on investing your money in order to make a profit on their own, while wealth managers help clients manage their finances in order for them to reach their financial goals.
If you are curious about more financial terms, find out more easy-to-digest financial education resources on our blog.
Got any questions? Share them with us in the comments.
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