Managing your money and making the right financial decisions is important for your long-term goals, but handling these things can be difficult on your own. A financial expert can help through two main types of services: wealth management and asset management.
Asset management focuses on growing investor money while wealth management looks at the overall picture to increase financial well-being. Both of these services are unique in their own right, making it vital to differentiate between the two to find the right one for your needs.
What is Wealth Management?
Wealth management takes on a broad view of your overall financial position. By analyzing the big picture of your financial situation, you and your advisor are able to employ creative strategies to maximize your wealth. Various different services are taken on by wealth managers, including:
- Life Insurance Planning
- Tax Planning
- Estate and Trust Planning
- Business Continuity Planning
- Charitable Donation Planning
- Retirement Planning
Effective wealth management includes the employment of multiple services, giving you tailored solutions to grow your wealth. The fees charged by wealth managers are generally based on the overall dollar value of the wealth managed. For example, wealth managers will assess a 1% monthly fee on the dollar amount of items they oversee. Some wealth managers, however, are paid an hourly fee, making it important to understand the structure before signing on with a firm or individual.
Typically, high net worth individuals utilize wealth management services when they have numerous different assets and financial objectives. Nonetheless, individuals of all backgrounds and income levels can benefit from the strategic insight and wealth maximization strategies that wealth advisors provide.
What is Asset Management?
Asset management is, like it sounds, the oversight of assets. Assets include all of your financial holdings, but asset management generally focuses on liquid assets, but can include illiquid assets, such as real estate too. The main goal of an asset manager is to advise you on the purchase, sale, transfer, or gift of assets to maximize income and minimize your tax liability. This is done through a detailed analysis of portfolio allocation. Common assets that these managers work with include:
- Stocks
- Bonds
- Mutual Funds
- EFTs
- Real Estate
- Crypto
Any class of items that are used to generate additional income or place your portfolio in a stronger financial position falls under the services of an asset manager. Asset management is commonly found in retirement and investment accounts at brokerages, but any specific asset that needs management can utilize an asset manager.
Like wealth managers, asset managers also frequently charge fees based on overall assets under management. This means the more assets you have, the larger your advisory fees will be. Keep in mind that income growth is more attainable with an asset manager, making the fees minimal compared to the overall increase in your portfolio value.
Which One is Right for Your Situation?
Choosing between asset management and wealth management is a decision that many individuals face. First, take a look at your goals. If you only need assistance with investing, a wealth advisor won’t be the best fit since they take a holistic approach to your financial situation. Wealth managers are beneficial when your goals include strengthening your overall financial position through tax savings, retirement planning, and estate planning.
Going with one or the other isn’t always the best decision. In fact, numerous individuals benefit from employing both an asset and wealth manager. Working with these professionals in conjunction allows you to steadily grow your portfolio while efficiently managing other financial areas of your life. The downside of having two advisors is you are paying double the fees unless you work with a firm that specializes in both areas.
How Can You Find the Right Advisor?
Finding the right manager for your needs takes careful consideration of different factors. First, evaluate their qualifications and past experience. Most advisors will hold some type of credential that gives them a competitive edge, such as a degree in finance or business. Past experience can outweigh credentials. For example, a manager with over 10 years of experience, but no credentials, may have more insight compared to a fresh college graduate.
Next, understand the fee structure and services offered. You want to be sure the potential manager has the ability to offer the services you need. Some advisors do specialize in certain areas, such as international investments or education planning. Additionally, there should be transparency in the fee structure. If your advisor is hourly, is the number of hours capped? These are all important areas to consider to find the right advisor for your needs.
Summary
Wealth management and asset management handle two different areas of your financial picture, but they can become intertwined based on the specifics of your situation. To select the right one for your needs, make a list of your goals to uncover which expert can provide more insight.
