It is easy to be confused by the terms investment management and wealth management, especially since they are commonly used interchangeably. So, what do these financial terms really mean, how are they different, and which approach might be best for you? Let’s find out.
Wealth management deals with the management of an individual’s finances as a whole, with the purpose of accomplishing their long-term financial and personal goals. Wealth management encompasses a comprehensive set of financial services, including:
- Legal planning
- Tax advice
Although having recourse to this eclectic set of services is rather expensive, a good wealth management service provider could justify the higher price through the savings their service provides.
Advantages of wealth management
For one, the financial approach of wealth management looks at all aspects of your financial affairs, providing you with a custom-made strategy to realize your long-term financial and personal goals. For example, by utilizing the extensive assortment of financial services offered by a wealth management firm, you can find the easiest way to pay off your home loan or plan for retirement, while also avoiding tax inefficiencies or undue risk at the same time.
Secondly, your wealth manager serves as a single focal point for all your financial matters. What this means is that instead of commissioning a wide array of financial advisors or investment managers, you only enlist the services of one wealth manager. This, as might be expected, streamlines your entire financial planning process.
What is investment management?
Investment management deals exclusively with organizing and growing investments. Upon understanding your long-term financial goals and acceptable risk levels, a professional investment manager will compile a portfolio of investments appropriate for your requirements. They will then keep you updated on the state of your 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.
Firstly, 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. Then there is the convenience. If you desire, you 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.
However, one of the biggest advantages is that you can gain the knowledge of the professionals. The best investment managers often have a wealth of experience and networks across India, which can help them spot the best opportunities and reach better results. Investment managers also have abilities that most individual investors do not. For example, they can increase their buying strength by pooling together several clients’ assets, with each benefiting from the greater yields.
Which is best for you?
Which service is most suitable will largely depend on your net worth and the type of assistance you require. 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 wealthiest even receiving fee discounts. Therefore, if you simply wish to see your investments grow, without the difficulty and risk of handling it yourself, gaining the services of an experienced investment manager could prove fruitful. However, for those with a higher net worth and a complex financial situation, the comprehensive methods of wealth management may be the best solution.