Asset Management vs Wealth Management

Asset Management vs. Wealth Management: Major Differences You Should Take Note Of

Ezra Cabrera | February 2, 2022


    Even if they seem like interchangeable terms, wealth management and asset management are quite different in practice. Generally speaking, wealth management is an advice given to address every aspect of a person’s financial life. It tackles cash flow, goal planning, and insurance coverage, among others. On the other hand, asset management is when an individual hires someone to direct their investments. Whether you need asset management or wealth management will depend on the specific situation and stage in life you’re in.

    In this post, you’ll learn the major differences between asset management and wealth management. By learning how the two services differ in practice, you’ll be able to identify which one you really need.

    What’s Asset Management?

    Asset management can refer to any process that helps a business, organization, or individual to identify and realize their assets over time. It can be anything that involves analyzing one’s assets and using that information to better utilize these assets over the course of their life. 

    Furthermore, asset management is a system that allows one to analyze their assets and use them in such a way that they can better serve the overall productivity of their company. It helps provide the individual with the necessary tools to maximize their business effectiveness and improve their bottom line. However, the results of this analysis may not always be immediate. In order to get the results that the managers want and need, the process requires some amount of work.

    There are many different ways in which a manager can look at the assets that an organization has, and the various aspects that go into maximizing the value of these assets. Some of these methods include cost-benefit analysis, capital cost analysis, enterprise value analysis, and so on. 

    Each of these approaches involves a different set of information. The results of these methods help determine the type of improvement or enhancement that’ll be beneficial to the organization or individual, as well as the costs involved. 

    Many of the methods of identifying the assets may require some type of contract with a third party. This will allow you to get the information that’s necessary for the process to work.

    What’s Wealth Management?

    Wealth management or personal wealth management is a kind of investment and financial management that offers services to a range of different clients–ranging from ultra-high-net-worth to extremely affluent. These services are mostly offered by financial planners, which deal with the entire process of building wealth for various clients.

    >Wealth management consultants work as advisers who work with individuals and companies to ensure that they achieve their financial goals through a sound financial strategy. Their role is to assess each client’s financial situation and work on ways to maximize and grow the wealth they have accumulated throughout their life.

    There are different kinds of strategies that are available to help wealthy people get richer and achieve their goals. A wealth manager will analyze each person’s financial situation and then plan and set up an ideal strategy that’ll enable them to build, preserve their wealth, and reach their financial goals in a secure manner.

    Asset Vs. Wealth Management

    You’ll probably want to enlist the assistance of someone to ensure that you meet your financial objectives. The types of people you’re likely to hire all go under the umbrella term “financial advisor.” Asset management and wealth management are the two most important services in this sphere. Depending on your circumstances, you may require simply one or both of these services. This tutorial examines the differences between asset vs wealth management and determines which service is best for you.

    Asset management is exactly what it sounds like: it’s the process of managing your assets. All of your financial possessions are considered assets, but asset management focuses on your investments. This involves stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other investments you make to try to increase your wealth and plan for the future. While Wealth management entails assessing a person’s or a family’s overall financial condition and taking efforts to maximize and protect their assets.

    Key Differences Between Asset Management And Wealth Management

    The significant differences between asset management and wealth management are the following:

    • Focus

    The focus of asset management is on the strategic alignment of financial assets. It’s designed to enhance the ability of organizations to access external capital resources at a low cost, helping achieve greater financial and/or management flexibility.

    The main objectives of asset management are to minimize external risks and to create a high return investment through long-term economic performance. Furthermore, asset management aims to provide an effective way to access and utilize the funds, assets, and expertise that are necessary for achieving an organization’s objectives.

    Assets must be managed in such a way that they provide value and won’t drain your revenue. Managers should strive to achieve this by having appropriate internal policies, controls, reporting mechanisms, and tools.

    On the other hand, wealth management uses various financial disciplines available, like asset management, retirement planning and investments, financial or retirement advice, estate and probate planning, and accounting.

    A wealth management consultant should have a certain amount of expertise in the specific discipline they’re specializing in. They may work for a firm specializing in estate planning or estate management or they may be a consultant working with individuals or companies to help them handle their wealth.

    • Registration

    Asset managers are usually registered broker-dealers. In the world of financial services, broker-dealers are responsible for securities on behalf of their clients or for their own account. Broker-dealers are at the core of the whole securities and derivatives trading system. They play a major role in making a profitable trading venture out of the investment that they’ve already taken.

    Wealth managers, on the other hand, are usually registered as investment or financial advisors. An investment advisor is someone who advises clients on how to make money by investing in the stock market.

    While there are plenty of professional investment advisors in the market today, a lot of investors turn to self-directed account investing in order to meet their investment goals. A self-directed account is an investment account, which is also known as a money-market account, a savings account, or any other financial institution where the principal isn’t held in trust by the investor. A self-directed account isn’t subject to the regulatory oversight of any of the SEC’s divisions and commissions. In short, a self-directed account isn’t subject to any rules or regulations set forth by any government agencies.

    • Compensation

    Asset managers are professionals who are typically commission-based, so they charge an amount for every person or group of people who sign up to use their service. The best way to make sure you’re getting the best price is to shop around and get several quotes.

    On the other hand, wealth managers are typically retainer fee-based services, which require a minimum amount of investment as initial capital.

    Final Thoughts

    Depending on your specific goals and circumstances, you may need an asset manager or a wealth manager. The former may be your best bet if you’re a newbie investor who’s looking to kickstart their portfolio. If you have a money situation that’s more complex or if its overall guidance that you’re looking for, a wealth manager may be the best person to call.

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.