What is the difference between investment management and wealth management?

Investment Management and Wealth Management – These terms are easy to get confused with, especially as they are often misrepresented. What do they actually mean, what are the key differences, and which one 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 managing clients’ investments, wealth management encompasses a broad set of services, including legal planning, insurance, accounting, and financial, charitable, and tax advisory.

There are higher minimum asset thresholds and you can expect to pay higher fees for the most comprehensive service. Although a good manager could justify this through the savings his service provides.

Advantages of wealth management

Because wealth managers offer many of the services of an investment manager, their clients get the same benefits. However, the additional services offered mean that wealth management can provide additional benefits.

Coherent strategy

Since wealth management looks at all aspects of clients’ financial affairs, their goal is to provide a personalized strategy to achieve their goals. For example, by combining different services, a wealth manager can find the best way to pay a mortgage or plan for retirement, while avoiding tax inefficiencies or undue risk.

This holistic approach attempts to understand and predict how the different areas of an individual’s finances interact and organize them appropriately.

Simplicity

A wealth manager can provide a single focal point for all financial matters. Instead of having a wide variety of advisers, a wealth manager can replace the need for an independent 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 investments, organize and grow clients.

After discussing a client’s financial goals and acceptable risk levels, an investment manager assembles an investment portfolio suited to their requirements. They will then keep clients updated on the status of their portfolio, offering recommendations and implementing changes.

Advantages of investment management

Investment management services sometimes require a minimal investment and come with a fee, usually a small percentage of assets under management. However, they can offer numerous benefits.

Reduced risk

With an investment manager building 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.

convenience

If the client wishes, a wide range of investments can be acquired with minimal effort, making it ideal for people with little time. As paperwork and day-to-day operations are sorted out, much of the investment stress is removed.

Higher returns

One of the biggest advantages is that you can get the knowledge of the professionals. The best investment managers often have extensive experience and global networks that can help them spot the best opportunities and achieve better results.

Investment managers also have skills that most individual investors do not have. For example, they can increase their purchasing power by pooling the assets of several clients, each of whom benefits from the highest returns.

Which one is the best for you?

Which service is most appropriate will largely depend on your net worth and the type of assistance you need. While a wealth manager offers more services than an investment manager, it is generally only available, or required, to the wealthiest clients, with the wealthiest even receiving discounted fees.

So if you simply want to see your investments grow, without the difficulty and risk of managing it yourself, hiring the services of an experienced investment manager could pay off. However, for those with a higher net worth and complex financial situation, comprehensive wealth management methods may be the best solution.