Investment management and wealth management – these terms are easily mistaken, especially as they are often misrepresented. What do they really mean, what are the key differences and what might be best for you?
What is wealth management?
Wealth management looks at the individual’s economy 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 includes a wide range of services, such as legal planning, insurance, accounting and financial, charitable counseling and tax consulting.
There are higher minimum thresholds and you can expect to pay higher fees for the more comprehensive service. Although a good manager could justify this through the savings their service provides.
Benefits of wealth management
As wealth managers offer many of an investment manager’s services, their clients receive the same benefits. However, the additional services offered mean that wealth management can provide additional benefits.
When wealth management looks at all aspects of clients’ financial affairs, it aims to provide a tailored strategy to realize their goals. For example, by combining different services, a wealth manager may find the best way to pay down a mortgage loan or plan a pension, while avoiding tax efficiency or unnecessary risk.
This holistic approach tries to understand and predict how different areas of the individual’s economy interact and organize them properly.
A wealth manager can provide a single focal point for all financial matters. Instead of having a broad range of advisors, a wealth manager may be able to replace the need for a separate financial planner or investment manager, e.g.
Their breadth of knowledge also means that they can act as a guide for those less familiar with the practices and technical languages that often surround financial services.
What is Investment Management?
The primary role of the Investment Manager is to advise, organize and grow clients’ investments.
After discussing a client’s financial goals and acceptable risk levels, an investment manager gathers a portfolio of investments to suit their needs. They then keep clients updated on the status of their portfolio, offer recommendations and implement changes.
Benefits of investment management
investment Management Services sometimes require a minimum investment and come with a fee – generally a small percentage of assets under management. However, they can offer several benefits.
When an investment manager builds 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 offset.
If the client so wishes, they can acquire a wide range of investments with the least effort, making it ideal for time-poor individuals. As paperwork and daily operations are taken care of, much of the investment stress is removed.
One of the biggest benefits is that you can get knowledge from the professionals. The best investment managers often have a wealth of experience and worldwide networks that can help them identify the best opportunities and achieve better results.
Investment managers also have capabilities that most individual investors do not. For example, they can increase their purchasing power by pooling more clients’ assets, each benefiting from the larger yields.
Which is best for you?
Which service is most suitable depends largely 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 necessary for the most affluent clients, with the richest even receiving fee discounts.
Therefore, if you simply want to see your investments grow without the hassle and risk of managing it yourself, giving an experienced investment manager can be extremely fruitful to get the services of an experienced investment manager. However, for those with a higher net worth and a complex financial situation, the comprehensive methods of wealth management may be the best solution.