Asset Management vs Wealth Management: Differences and Benefits

Short Answer: Asset managers focus on investment management while wealth management focuses on your holistic financial needs. 

Managing your finances can be a complex and daunting task, especially when it comes to investing and planning for the future. Consider turning to professional financial services to get all your questions answered. But do you need a wealth manager or asset manager?

Asset management and wealth management are two closely related but distinct services in the financial industry. Both aim to help individuals and institutions manage their money, but they differ in their scope, target clients, and services provided.

Whether you're an individual with significant assets or a business seeking to maximize returns, understanding the differences between asset management and wealth management can help you make informed decisions to reach your financial goals. Read on to understand asset management vs. wealth management.

What Is Asset Management?

Asset management is a service that helps individuals or corporations grow their money. You allow a financial services institution to guide your portfolio, and in turn, the institution determines which investments are best to grow your wealth. Here are the pros and cons of hiring an asset manager. 

Asset management is the process of managing and optimizing a client's investment portfolio. Asset managers are responsible for making investment decisions, monitoring market conditions, and adjusting portfolios to align with the client's investment objectives and risk tolerance.

Services offered by an asset manager typically include:

• Portfolio construction and management
• Investment research and analysis
• Risk management
• Performance monitoring and reporting

Pros of Asset Management

• Investment options: You’ll access a wider range of investment opportunities. 
• Returns: Asset managers can help you to minimize risk and maximize rewards. 
• Convenience: You can easily keep track of what you own, where your investments are located, and how your investments are doing in one place.
• Professional management: Instead of spending hours researching and analyzing market trends, a professional does it for you.

Cons of Asset Management

• Minimums: The investment minimum to meet a company’s wealth criteria varies by company and can range anywhere from $100,00 to $5 million.
• Possible losses: If the individual or company managing your assets doesn’t mitigate risk properly, it can result in losses for you.
• Fees: Asset managers may charge significant fees. Some asset management firms charge a percentage on managed accounts and others charge a flat annual fee, which typically ranges from $5,000 to $10,000, depending on the size of your portfolio.

What Is Wealth Management?

Wealth management is a more comprehensive and holistic approach to managing a client's overall financial well-being. It encompasses a wide range of services, including investment management, retirement planning, estate planning, tax planning, and more. A wealth manager acts as a personal financial advisor, guiding clients through various stages of their financial lives.

Wealth management is a financial planning service designed to help you make the most of your wealth and protect it. A personal wealth manager works with you to coordinate your investments and finances and provides a comprehensive plan for your current or future needs. Personal wealth managers consider all your assets and investments, show you how to invest, and guide you in ways to leverage your money. 

The wealth manager can also help you account for capital gains tax on stocks or find states with no retirement income. They can help you build your retirement plan, and maximize your 401(k), Roth IRA, or other retirement accounts while reaching other financial goals. 

Services offered by a wealth manager may include:

• Investment management
• Retirement planning
• Estate planning
• Tax planning and optimization
• Risk management
• Charitable giving strategies
• Family office services

Pros of Wealth Management

• Comprehensive planning: Your wealth manager will help you create a comprehensive financial strategy, make strategic decisions, and prioritize financial goals over time.
• Personalized strategy: You get individualized services tailored to your financial goals.
• Help meet your goals: Your wealth manager continually thinks of you and your finances and works with you to navigate the market.

Cons of Wealth Management

• Risk: There are risks anytime you invest. You’ll need to assess your risk comfort with your wealth manager.
• Costs: Many wealth managers charge an annual fee based on your portfolio’s size, which is typically a sliding scale, with an average rate of around 1% of your assets under management (AUM).
• Passive involvement: You have to be able to trust someone else with your money instead of managing it yourself. You'll need to ensure the wealth manager has fiduciary responsibility, as the individual wealth manager handles everything. 

Asset Management vs. Wealth Management: What’s the Difference?

While asset management and wealth management share some similarities, there are distinct differences in their scope, target clients, and payment structures. Here's a table that outlines the key differences between asset management and wealth management:

Asset Management vs. Wealth Management: Which Is Right for You?

Choosing between asset management and wealth management services depends on your specific financial situation, goals, and needs. Here are some factors to consider:

• Assets: If you have significant investable assets, wealth management services may be more suitable as they provide a comprehensive approach to managing your overall financial well-being.
• Life stage: Individuals in different life stages may have varying needs. For example, those nearing retirement may benefit more from wealth management services that include retirement planning and estate planning.
• Complexity: If you have a complex financial situation involving multiple investment accounts, business interests, real estate holdings, or international assets, wealth management services can help navigate and coordinate these complexities.
• Personal preferences: Some individuals prefer a more hands-on approach to managing their investments, while others prefer a more comprehensive and personalized service. Wealth management services cater to those who value a holistic approach and personalized attention.

If you’ve determined that your assets are significant enough to require help from an asset or wealth manager, how do you decide which professional will fit your needs? First, you must determine what your financial needs are and define your financial goals. 

Wealth Manager

If you’re looking to grow your wealth, protect it in the future, and plan for your family’s current and future needs, working with a wealth management professional could be right for you. Wealth managers offer a holistic approach to financial planning by coordinating all the services needed to manage your money and plan for your needs. They provide inclusive financial advice across the financial industry and personally oversee all aspects of your finances. Make sure you have a wealth manager you trust — it’s crucial for successfully building and maintaining your finances.

Asset Manager

If you want more targeted services to manage your assets and grow your investments, working with an asset manager can be a better fit. An asset manager’s goal is to maximize portfolio growth and minimize risk. Advisors conduct rigorous market research to inform their investment decisions. They often work within a financial institution and may utilize third-party services as part of their investment strategy. Advisors typically offer higher transparency than wealth managers but you may not get the same degree of personal relationship that you have when you work with a wealth manager.        

How to Find Asset and Wealth Managers

Finding the right asset or wealth manager can be a critical decision. Here are some tips to consider:

• Referrals: Ask for recommendations from friends, family members, or professionals you trust, such as accountants or attorneys.
• Professional organizations: Check directories of reputable professional organizations, such as the Certified Financial Planner (CFP) Board or the Financial Planning Association (FPA).
• Online searches: Use online directories and review platforms to research potential asset or wealth managers in your area.
• Interviews: Once you've identified potential candidates, schedule interviews to assess their qualifications, experience, and compatibility with your financial goals and preferences.
• Credentials and experience: Look for professionals with relevant credentials, such as the Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA) designations, and experience working with clients similar to your financial situation.

Unlocking Asset and Wealth Management

Managing your finances effectively is crucial for achieving your financial goals and securing your future. Whether you choose asset management or wealth management services, understanding the differences between the two can help you make an informed decision that aligns with your unique needs and circumstances. By partnering with the right financial professionals, you can unlock your financial potential and achieve long-term success. 

If you're looking for more support, Benzinga has numerous resources. You can find the best asset management companies, or understand the differences between a financial advisor vs. a financial planner or an investment advisor. You can find some of the best financial advisors or robo-advisors. Or, learn what questions you can ask a financial advisor or find the best-managed investment accounts.