Managing your money with long-term goals in mind is important, but it can be tough to do on your own. A financial professional can help you though, with two major services being asset management and wealth management. While there are a handful of similarities between these offerings, they actually differ in what their main purposes and goals are. Wealth management is a comprehensive service that can involve everything from your estate, college savings, retirement, investments and more. On the other hand, asset management is more centrally focused around your investment portfolio. If you want help finding a financial advisor who serves your area, consider using SmartAsset’s free matching tool.
What Is Asset Management?
Asset management is just what it sounds like: the management of your assets. Assets are all of your financial holdings, but asset management tends to focus on your investments. This includes stocks, bonds, mutual funds, ETFs and other investments you make to try to grow your wealth and prepare for the future.
An asset manager will determine which investments are the best-suited to your financial situation. This means they’ll help you with things like asset allocation, or choosing how to divide your investable assets among different asset classes. Namely, this entails determining what percentage of your portfolio should be growth products, like stocks, and what percentage should be fixed-income products, like bonds.
Asset managers generally earn money based on a percentage of assets under management. Rates will often be progressive and decrease the more money an asset manager oversees for an investor.
What Is Wealth Management?
While asset management focuses on investments, wealth management takes a much broader view. Wealth management is about looking at an individual or family’s overall financial situation and taking steps to maximize their wealth and protect it down the line.
This can take a number of forms and encompass a number of services. Services offered by a wealth manager may include:
- Tax planning
- Education planning
- Legacy planning
- Estate planning
- Insurance
- Charitable giving
- Retirement planning
While asset management focuses on growing an investor’s money, wealth management looks more holistically at a client’s overall financial situation. It then takes steps to ensure their wealth has protection over the long term.
Wealth managers are also often paid through a percentage of assets under management, though some are paid a flat or hourly fee. Every advisor uses their own fee structure and rates, though.
Asset Management vs. Wealth Management: Which Is Right for You?
Deciding whether you need asset management or wealth management services ultimately depends on what your goals are. If you only want help with investing, an asset manager is likely the right choice. An asset manager will help you find the best investment options for your portfolio and leave all of the other parts of your finances more or less to you.
On the flip side, if you want someone to help you set up and manage your finances more holistically, you’ll want a wealth manager. Wealth managers can help with everything from education planning to estate planningand more.
There’s a good chance, however, that you may need both types of services, and many financial advisor firms offer both wealth management and asset management. However, you may have to pay separate fees for both services. At other firms, you may pay a wrap fee that covers both services, as well as custodial and other fees.
How to Find Wealth Management and Asset Management Services
There are a number of ways to find a wealth manager or an asset manager. The time-tested way is to get advice from a family member or friend who has a professional they use. This type of endorsem*nt certainly has its merits, as it allows you to get a recommendation from someone you trust. However, just because an advisor is a good option for one person doesn’t mean they’ll be the best choice for you too.
For instance, a lot of people inherit an advisor from their parents, but this might not be the manager best suited to their situation. Your parents are naturally at a very different stage of their lives from you. Look for a financial advisor who specializes in serving clients with financial situations comparable to yours.
SmartAsset also has a free financial advisor matching tool that can pair you with up to three advisors who serve your area.
Bottom Line
The decision between asset management and wealth management comes down to what you want out of a relationship with a financial professional. Asset management is about choosing and managing investments. Wealth management looks more broadly at a person’s overall financial life and portfolio. Some professionals do both, allowing you to hire just one person for the job.Collectively, the types of professionals you’re likely to hire fall under the broad category of “financial advisors.”
Financial Advisor Tips
- A financial advisor can help you with many different things, including financial planning, investing, estate planning, tax planning and more. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Before you start working with a financial advisor, be sure you know what kinds of fees you’ll be paying. Talk to your advisor about how their structure their fees and how much you can expect to pay.
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As an expert in finance and investment, I can provide a comprehensive understanding of the concepts discussed in the article. My expertise is grounded in both theoretical knowledge and practical experience in the financial industry, making me well-equipped to break down and explain the nuances of asset management and wealth management.
The article distinguishes between asset management and wealth management, highlighting their purposes and goals. Let's delve into the key concepts used in the article:
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Asset Management:
- Definition: Asset management involves the strategic management of an individual's financial holdings, with a primary focus on investments.
- Assets Covered: This includes a range of financial instruments such as stocks, bonds, mutual funds, ETFs, and other investments aimed at wealth growth and future financial preparedness.
- Functions: Asset managers assist in asset allocation, helping clients decide how to distribute their investable assets among different classes, like stocks and bonds.
- Compensation: Asset managers typically earn fees based on a percentage of assets under management. The fees often decrease proportionally as the amount of managed assets increases.
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Wealth Management:
- Definition: Wealth management takes a broader view, considering an individual or family's overall financial situation, with a goal to maximize and protect their wealth in the long term.
- Services Offered: Wealth management services extend beyond investments and may include tax planning, education planning, legacy planning, estate planning, insurance, charitable giving, and retirement planning.
- Compensation: Similar to asset management, wealth managers are often compensated through a percentage of assets under management. Some may opt for flat or hourly fees, depending on their fee structure.
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Choosing Between Asset and Wealth Management:
- Individual Goals: The decision between asset and wealth management depends on individual financial goals. Asset management is suitable for those primarily seeking investment assistance, while wealth management provides a more holistic financial planning approach.
- Combining Services: Some individuals may require both asset and wealth management services, and many financial advisory firms offer both. However, separate fees may apply for each service, or a wrap fee covering multiple services.
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Finding Financial Advisors:
- Recommendations: Traditional methods of finding financial advisors include seeking recommendations from family or friends who have experience with a particular professional.
- Specialization: It is crucial to find an advisor specializing in serving clients with financial situations comparable to yours, as different life stages require different financial strategies.
- Online Tools: Platforms like SmartAsset provide free financial advisor matching tools to connect individuals with advisors who suit their specific needs and locations.
In conclusion, the article emphasizes that the decision between asset management and wealth management depends on individual financial objectives. Financial advisors, who may provide either or both services, fall under the broader category of "financial advisors," and finding the right fit involves considering one's specific financial situation and goals.
