Difference between Asset Management and Wealth Management

difference between asset management and wealth management

In this article I will review the differences between asset management and wealth management. Asset management is a consulting service offered by a bank or company that discusses, supervises and manages the assets of a person or entity. In contrast, wealth management is not just investment advice or strategy, it deals with the management of all aspects of the financial life of an individual household or company in a consultative and analytical manner.

Monitoring wealth is essential for continuous improvement and effective management. Apart from that, it will also help individuals or entities to ascertain the extent to which investments can be made to generate good returns while identifying and mitigating risks.

In this case, terms such as asset management and wealth management are often used. In this article, we will discuss the differences between the two.

Definition of Asset Management

Asset Management is a financial service for managing all or part of a client’s portfolio in an organized manner.

A service provided by an asset management company, bank, financial institution or individual, where the client’s capital is parked by creating an investment portfolio that will generate future returns. Due to the minimum investment of these companies, clients are usually HNIs (high net worth individuals), legal entities, public sector entities, etc.

On the one hand, Asset management is a two-fold process, it aims to appreciate the client’s assets over time, but, on the other hand, it reduces the risk factor. It includes the development, management, expansion and disposal of assets in a way that is beneficial to the client. Basically, asset management firms invest client capital into various stocks, bonds, real estate and private equity

Asset managers are experts who determine which investments to make or avoid, which will help in growing the portfolio. For this purpose, thorough research was carried out using various tools.

Definition of Wealth Management

Wealth management can be understood as a comprehensive service provided by banks, financial institutions and other investment advisors that involves optimizing, protecting and managing the overall financial goals of individuals, households or companies.

To this end, first of all, the wealth manager develops a plan that preserves and increases the client’s wealth, based on the individual’s financial situation, goals, and risk tolerance level. Managers need to visit clients regularly to discuss objectives, review and update clients on portfolios and check if there are requirements for additional services.

In wealth management, wealth managers are required to collect personal and financial data in order to develop a different set of recommendations and tailor those recommendations to each client.

It guarantees a lasting relationship and is committed to the long term by taking care of all the client’s needs. Wealth management can be understood as a platform that provides various products and services.

Moreover, it is a one-stop model that provides consulting and guidance on investment management, tax planning, legal advice, asset management, debt management, cash flow management, retirement solutions, real estate management, etc.

Difference Between Asset Management and Wealth Management

The differences between asset management and wealth management are discussed below:

  1. Asset management is a systematic technique for actively managing, supervising and investing client funds, into productive investments in financial markets, by banks or asset management companies. In contrast, 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 strategies to invest in appropriate financial products and services.
  2. Asset management includes monitoring and managing the assets/investments of clients, usually high net worth individuals, legal entities, and others. Whereas wealth management involves resolving/improvement of the client’s financial situation.
  3. Wealth management includes a wide range of financial and consulting services, one of which is asset management. Therefore, we can say that asset management is one part of wealth management.
  4. Wealth Management includes financial planning, tax planning, portfolio management, asset management, legal planning, retirement planning, risk management, etc. In contrast, asset management involves data collection and analysis, risk return analysis, forecasting, strategic planning and implementation, identification of suitable investment vehicles, etc.
  5. Asset Management deals with asset management/investment on behalf of clients. As against, Wealth Management is the overall management of a client’s finances, by a professional or expert.
  6. The Asset Management Company is registered as a broker or dealer. In contrast, Wealth Management firms are included as investment advisors.
  7. The goal of asset management is to balance cost, risk and asset performance. However, the goal of wealth management is to maintain and increase the long-term wealth of wealthy clients.

Similarity

  • Both wealth management and asset management employ a variety of products, services and strategies.
  • Both services are personalized according to the objectives and financial situation of the person or entity.
  • Both services are provided by banks and financial service institutions.
  • Both services are client-centric, aiming to increase wealth, profitability and maximize returns.
  • Both are covered by private banking services.

Conclusion

In short, asset management is all about fund management where asset manager takes timely decisions regarding investments to make/hold/sell. On the other hand, wealth management offers clients various solutions to assist clients in generating maximum returns on the amount invested.