Updated November 17, 2023
Difference Between Asset Management vs Wealth Management
Asset management refers to managing assets involving investments like equity, fixed-income securities, real estate, global investments, etc. Asset management firms are concerned with maximizing the returns of clients’ assets. Wealth management refers to overseeing all the financial aspects of the client and may include management of assets, taxes, estate, cash flows, and all other possible uses of money. Wealth management thus encompasses asset management and takes a holistic view of the client’s finances. Based on their requirements, investors need to decide whether they require the services of an asset management firm, wealth management firm, or both.
Asset Management vs Wealth Management Infographics
Below is the top 7 difference between Asset Management vs Wealth Management:
Key Differences Asset Management vs Wealth Management
Both Asset Management vs Wealth Management are popular choices in the market; let us discuss some of the major differences :
- Asset managers manage an individual’s/institution’s investments like stocks, fixed-income securities, real estate, and other assets. In contrast, wealth managers manage all the financial aspects of an individual/institution, including asset management, tax planning, education, legacy and estate planning, cash flow planning, insurance, charitable contributions, retirement planning, etc.
- Asset managers aim to maximize returns from clients’ investments. In contrast, wealth managers aim to balance all possible uses of clients’ money to preserve and maximize wealth over the long run through financial and investment strategies, accounting and tax approaches, and legal and estate planning.
- The Asset managers mostly offer in-house products and are narrower and more sophisticated in their approach since they are primarily investment experts and closer to the market. Wealth managers are mo.
- Re-process-driven and seek synergy gains through coordination of inputs from financial experts, client’s attorney, accountant, insurance agent, and others.
- Asset management firms are usually registered as broker-dealers. They are only required to offer investment products “suitable” for the clients. In contrast, wealth managers are registered as investment advisors and have a “fiduciary” or legal responsibility to put the client’s financial interests before their own.
- Asset management compensation has been traditionally commission-based, although firms are increasingly shifting to a fee-based model for assets under management. Wealth management compensation has traditionally been retainer fee-based and a fee for assets under management.
- The asset managers advise on asset allocation, new investment opportunities, risk-return analysis, portfolio strategy formulation, etc. Thus, asset management is only concerned with the best way to invest and manage one’s money, while other client financial issues, like tax planning, cash flow planning, estate planning, etc., are left for the client to figure out.
- Wealth managers aim to grow investors’ wealth and provide advice for future planning. Wealth management service is especially useful for those nearing retirement to assist them in all their future financial requirements.
Asset Management vs Wealth Management – Comparison Table
Let’s have a look at the Comparison between Asset Management vs Wealth Management:
|Criteria||Wealth Management||Asset Management|
|Meaning||Refers to the management of all financial aspects of the client.||Refers to the management of assets of a client.|
|Focus||A wider focus includes asset management and financial planning.||Narrower focus, a subset of wealth management.|
|Functions||Include management of investments/assets and portfolios, tax planning, education planning, legacy planning, estate planning, insurance, charitable contribution, and retirement planning.||Include management of investments/assets- analyzing past and current data, risk-return analysis, projection, strategy formulation for asset management, and identification of “suitable” assets.|
|Registration||Usually registered as investment advisors.||Usually registered as broker-dealers.|
|Responsibility||“Fiduciary” responsibility to put client interest before self.||Required to offer products “suitable” for the client.|
|Management approach||A process-driven approach involving coordination of inputs from financial experts, lawyers, accountants, insurance agents, and other specializations required for financial management.||More sophisticated and creative approach since asset managers mostly offer in-house products through their own financial expertise and direct involvement in a market.|
|Compensation terms||Retainer fee-based along with a fee for an asset under management that favors impartiality in recommendations.||Usually, commission-based product sales may give rise to a conflict of interest.|
People often use the terms wealth management vs asset management interchangeably, but there are significant differences between the two. While both are used in managing and growing financial resources, service users may seek financial expertise beyond their investments. Asset management firms help investors manage their assets by offering advice on identifying “suitable” assets for the client through analysis of past and current trends, risk-return analysis, strategy formulation, and appropriate projections in return for a commission.
Wealth management is a more comprehensive financial management service providing assistance in tackling all the financial aspects of the client. It includes asset management, financial, tax, retirement, and estate planning. An investor seeking such an all-inclusive service may be more inclined to have a steady relationship with a wealth management firm rather than relying only on asset managers. Some wealth managers provide banking services and guidance on philanthropic activities as well.
Of course, wealth management is more expensive and involves a retainer fee and a fee for an asset under management. In spite of that, it is a less complicated approach for service users wherein a single manager coordinates inputs from financial experts, lawyers, accountants, insurance agents, and others needed for planning the client’s current and future financial needs. Wealth managers assist in prioritizing.
If you need help with only your investments, you would need the services of an asset manager, while if you want somebody to help you with your long-term financial planning aspects apart from asset management, you would need a wealth manager.
While we are all working towards earning money in our lifetime, it is equally important to manage that money well to achieve our financial goals smoothly. This is equally true for organizations as well. Money management is especially important for those people who have no financial expertise. Individuals/institutions can take the services of finance professionals to advise them on those matters. There are broadly two categories of private banking services that investors can avail of, viz. asset management vs wealth management.
This has guided the top difference between Asset Management and Wealth Management. Here we also discuss the Asset Management vs Wealth Management key differences with infographics and comparison table. You may also have a look at the following articles to learn more-