Investment management and wealth management – it is easy to be confused by these terms, especially since they are often misrepresented. What do they really mean, what are the key differences, and which might be best for you?
What is wealth management?
Wealth management looks at an individual’s finances as a whole and how they can be managed to achieve their long-term financial and personal goals. In addition to handling clients’ investments, wealth management encompasses a wide set of services, such as legal planning, insurance, accounting, and financial, charitable giving, and tax advice.
There are higher minimum asset thresholds, and one can expect to pay higher fees for the more comprehensive service. Although a good manager could justify this through the savings their service provides.
Advantages of wealth management
As wealth managers offer many of the services of an investment manager, their clients gain the same benefits. However, the additional services on offer mean that wealth management can provide further advantages.
As wealth management looks at all aspects of clients’ financial affairs, it aims to provide a custom-made strategy to realise their objectives. For example, by combining different services, a wealth manager can find the best path to paying off a mortgage or planning for retirement, whilst avoiding tax inefficiencies or undue risk.
This holistic approach attempts to understand and predict how different areas of an individual’s finances interact and organise them appropriately.
A wealth manager can provide a single focal point for all financial matters. Rather than having a wide assortment of advisors, a wealth manager may replace the need for a separate financial planner or investment manager, for example.
Their breadth of knowledge also means that they can act as a guide for those less familiar with the practices and technical language that often surrounds financial services.
What is investment management?
The primary role of the investment manager is to advise on, organise and grow clients’ investments. wealth management software
After discussing a client’s financial goals and acceptable risk levels, an investment manager assembles a portfolio of investments appropriate to their requirements. They then will keep clients updated on the state of their portfolio, offering recommendations and implementing changes.
Advantages of investment management
Investment management services sometimes require a minimum investment and come with a fee – generally a small percentage of the assets under management. However, they can offer numerous benefits.
With an investment manager constructing a diverse portfolio, assets are less vulnerable to fluctuations in individual investments. With hundreds of smaller investments likely spread across different industries and asset classes, if one performs poorly, others are likely to compensate.
If the client desires, they can acquire a wide range of investments with the minimum effort, making it ideal for time-poor individuals. As the paperwork and day-to-day running is taken care of, much of the stress of investing is removed.