Asset management is a consultancy service offered by banks or firms, which discusses, oversees, and manages the assets of a person or entity. On the contrary, wealth management is not just investment advice or strategy, because it addresses all the facets of an individual’s household’s or company’s financial life in a consultative and analytical manner.
Keeping an eye on wealth is extremely important for its continuous increase and effective management. Moreover, it will also help the individual or entity to ascertain to what extent investment can be made to generate good returns while identifying and mitigating risk.
In this regard, terms like asset management and wealth management are often used. In this post, we are going to discuss the difference between these two.
Content: Asset Management Vs Wealth Management
Comparison Chart
| Basis for Comparison | Asset Management | Wealth Management |
|---|---|---|
| Meaning | Asset management implies the advisory service provided by the asset management company to govern and monitor the client's portfolio for a certain fee. | Wealth management is a professional service which integrates financial services and bundles them into one comprehensive package, created to provide a complete solution to the client's financial aspects. |
| What is it? | A technique of monitoring and managing assets/investments of the client. | A technique of solving/improving the financial situation of the client. |
| Scope | Narrow | Wide |
| Covers | Management of investments, as to the analysis of data, risk and return, strategy formulation, etc. | Management of assets and portfolios, retirement planning, real estate management, charitable contribution, insurance, etc. |
| Related to | Management of clients assets. | Management of client's overall finances. |
| Incorporation of companies | As brokers or dealers. | As investment advisors. |
| Objective | To balance cost, risk and performance of assets. | To sustain and increase wealth of affluent clients in the long term. |
Definition of Asset Management
Asset Management is a financial service of administering all or a certain portion of the client’s portfolio in an organized way.
The service provided by an asset management company, bank, financial institution or individuals, wherein the client’s capital is parked, by creating an investment portfolio which will generate returns in future. Due to the investment minimums of these companies, the clients are typically HNI’s (High net worth individuals), body corporates, public sector entities, etc.
Asset Management is a two-fold process, on one hand, it aims at appreciating client’s assets over time, however, on the other hand, it mitigates risk factor. It includes development, management, expansion and disposal of assets in a way which is beneficial to the client. Basically, the asset management firm invest the client’s capital into various stocks, bonds, real estate and private equity
The asset manager is the expert who ascertains the investments to be made or avoided, which will help in growing the portfolio. For this purpose, thorough research is carried out using various tools.
Definition of Wealth Management
Wealth management can be understood as the exhaustive service provided by banks, financial institutions and other investment advisors which involves optimization, protection and management of the overall financial goal of an individual, household or company.
For this purpose, first of all, the wealth manager develops a plan which perpetuates and increases the client’s wealth, on the basis of the financial situation, goals and risk tolerance level of the individual. The manager needs to visit the client at regular intervals so as to discuss the goals, review and update the client about the portfolio and check if there is any requirement for additional services.
In wealth management, the wealth manager is required to collect both personal and financial data to develop a distinguished range of recommendations and customize those recommendations to each client.
It guarantees a lasting and committed relationship for the long term by looking after all the needs of the clients. Wealth management can be understood as a platform which provides a range of products and services.
Moreover, it is an umbrella model, which provides consultation and guidance on investment management, tax planning, legal advice, asset management, debt management, cash flow management, retirement solution, real estate management, etc.
Key Differences Between Asset Management and Wealth Management
The difference between asset management and wealth management are discussed below:
- Asset management is a systematic technique of actively managing, overseeing and investing clients funds, into productive investments in the financial market, by a bank or asset management firm. On the contrary, wealth management is a consultative service in which the advisor extracts information about the client’s needs, risk tolerance level, return expectations, etc and creates a strategy to invest in suitable financial products and services.
- Asset management encompasses monitoring and managing assets/investments of the client, usually high net worth individuals, body corporates, etc. As against wealth management involves solving/improving the financial situation of the client.
- Wealth management includes a range of financial and advisory services, one of which is asset management. Hence, we can say that asset management is one part of wealth management.
- Wealth Management covers financial planning, tax planning, portfolio management, asset management, estate planning, legal planning, retirement planning, risk management, etc. In contrast, asset management involves gleaning and analysis of data, risk-return analysis, forecast, strategic planning and implementation, identification of appropriate investment vehicles, etc.
- Asset Management is concerned with the management assets/investment on behalf of clients. As opposed, Wealth Management is the management of overall finances of the client, by a professional or an expert.
- Asset Management companies are registered as brokers or dealers. Conversely, Wealth Management companies are incorporated as investment advisors.
- The objective of asset management is to balance cost, risk and performance of assets. However, the objective of wealth management is to maintain and increase long term wealth of the affluent client.
Similarities
- Both wealth management and asset management employs a wide spectrum of products, services and strategies.
- Both services are personalized as per the financial goals and situation of the person or entity.
- Both services are provided by banks and financial service institutions.
- Both services are client-centric, which aims at increasing wealth, profitability and maximizing returns.
- Both are covered under private banking services.
Conclusion
In a nutshell, asset management is all about the management of funds, wherein the asset managers take well-timed decisions as to the investments to be made/hold/sold. On the other hand, wealth management is concerned with offering a wide range of solutions to the client, to help the client in generating maximum returns out of the amount invested.
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Greg Camber says
Management of wealth is one challenging job, and if you are not careful, it could come back to haunt you. This article is immensely informative—great job signifying such important points that people need to consider.