What is the difference between investment management and wealth management?

Investment management and wealth management – it’s easy to be confused by these terms, especially since they are often misrepresented. What do they really mean, what are the main differences, and which 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 wide range of services, such as legal planning, insurance, accounting, and financial, charitable and tax advice.

There are higher minimum asset thresholds and one can expect to pay higher fees for the most comprehensive service. Although a good manager can justify this by the savings their service offers.

Benefits of Wealth Management

Since wealth managers offer many of the services of an investment manager, their clients enjoy the same benefits. However, the additional services offered mean that wealth management can offer other benefits.

Coherent strategy

As Wealth Management examines all aspects of clients’ financial affairs, it aims to provide a tailored strategy to achieve their goals. For example, by combining different services, a wealth manager can find the best way to pay off a mortgage or plan for retirement, while avoiding tax inefficiencies or undue risk.

This holistic approach tries to understand and predict how 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. Rather than having a wide range of advisers, a wealth manager can replace the need for a separate financial planner or investment manager, for example.

Their breadth of knowledge also means they can act as a guide for those less familiar with the practices and technical language 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 levels of risk, an investment manager builds an investment portfolio tailored to their needs. They will then keep clients informed of the status of their portfolio, offering recommendations and implementing changes.

Benefits of investment management

Investment management services sometimes require a minimum investment and charge a fee – usually a small percentage of assets under management. However, they can provide many benefits.

Reduced risk

With an investment manager who builds a diversified 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, he can acquire a wide range of investments with minimal effort, which makes it ideal for people who are short on time. As the paperwork and day-to-day management is taken care of, much of the investment stress is eliminated.

Higher yields

One of the biggest advantages is that you can acquire the knowledge of 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 abilities that most individual investors do not have. For example, they can increase their purchasing power by pooling the assets of several clients, each benefiting from the best returns.

Which is best for you?

The most appropriate service 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, they are generally only available, or needed, to the wealthiest clients, with the wealthiest even benefiting from reduced fees.

Therefore, if you simply want to see your investments grow, without the difficulty and risk of managing them yourself, getting the services of an experienced investment manager could prove fruitful. However, for those with higher wealth and a complex financial situation, comprehensive wealth management methods may be the best solution.