Asset Management vs Wealth Management: Which Is Right for You?

Asset management focuses on optimizing individual investments like stocks or real estate, while wealth management takes a holistic approach to your entire financial life. Choosing between the two depends on your net worth, asset complexity, and long-term goals. Some firms offer both to create a comprehensive financial strategy.

• Asset Management targets the growth of specific investments with tailored risk strategies.
• Wealth Management encompasses tax, estate, insurance, and retirement planning.
• Key Difference: Asset management is a subset of wealth management.
• Choose Based On asset types, financial goals, and net worth.
• Elite Income Advisors offers integrated services covering both approaches.

Whether you’re an investor of moderate means or a high-net-worth individual (HNWI), the challenge of investment management can’t be taken lightly. Making the most of one’s finances requires a combination of good judgment and a thorough understanding of value (in terms of both present and potential worth).

Understanding the asset management and wealth management difference – and knowing the importance of each – represents a vital first step toward a well-performing portfolio. Here, we’ll examine these practices in detail and help you know how best to leverage both of them.

What is Asset Management vs Wealth Management?

It’s worth noting the shared purpose of these processes before answering “What is the difference between asset management and wealth management?” Specifically, both serve to maximize the value of your net worth. With that in mind, don’t necessarily think of them as a binary, although you may ultimately need one more than the other in the near term.

Asset Management: The Search for Alpha

Often, the term “asset management” focuses on financial instruments like stocks, bonds, commodities, and funds. But asset management services can also encompass real estate, private equity, rare property (fine art, antiques, and so on), derivatives, and much more.

An asset manager’s primary responsibility is to consistently boost the value of their clients’ asset portfolios in a way that aligns with customers’ unique needs and risk tolerances. For example, a professional in this trade wouldn’t funnel a casual investor’s capital into volatile stocks, derivatives, or cryptocurrency. Nor would an asset manager working for an ambitious alpha-seeker strictly play it safe with bonds or real estate.

That said, few (if any) asset managers take one-dimensional high-, moderate-, or low-risk approaches. Diversification is key. An optimal asset allocation strategy might spread a client’s capital across a wide variety of assets:

• Stock shares in trending companies
• Purchases of inflation-resistant commodities (gold, grains, oilseeds)
• Exchange-traded, index, or mutual funds that give investors access to a wide range of equities rather than a single company’s stock or government bond.
• Residential real estate in areas with consistent demand.

No matter the specific methods, every asset manager seeks to grow their clients’ assets under management (AUM) without putting capital at excessive risk.

Wealth Management: The Biggest Picture

The simplest explanation of the asset vs wealth management difference is that asset management can be part of wealth management, but not vice versa.

Wealth managers oversee virtually every aspect of their clients’ financial lives. Strengthening the value and diversity of customers’ investment portfolios is part of that, but it’s hardly the primary goal of the process. Theoretically, you’d be just as likely to encounter a wealth management expert reading about recent tax code changes as you would find them poring over the S&P 500.

Fundamental responsibilities of a wealth manager beyond the realm of portfolios include:

• Tax strategy: Looking for ways to reduce annual tax liability by maximizing deductions, offsetting capital gains taxes, restructuring business interests, and much more.
• Insurance management: Finding the right insurance policies for clients’ unique needs, ranging from life coverage to liability insurance and anything in between.
• Retirement planning: Overseeing 401(k) plans, opening Roth IRAs or similar accounts, managing annuities, and executing other tasks to ensure a financially secure retirement.
• Estate planning: Establishing living wills and trusts, designating beneficiaries for specific assets, assigning durable power of attorney, and finding other ways to preserve (and pass on) clients’ wealth after they pass away.

Wealth managers view their practice and the associated obligations from a holistic perspective because the responsibilities overlap in various ways.

For example, certain aspects of estate planning (most notably trusts) don’t simply provide for individuals’ beneficiaries after they die but also shield assets from taxation during life. Similarly, managing investment strategies tie into retirement planning for a client using a variable or indexed annuity to earn income after they stop working.

The wide-ranging and complex nature of a wealth manager’s services also means that HNWIs make up nearly all of their customer base. In today’s finance world, the term typically refers to those with at least $1 million in liquid assets (regardless of whatever other resources they do or don’t possess).

Asset Management or Wealth Management: Choosing the Best Service for Your Needs

For better or worse, this choice may be partially out of your control. Wealth managers who strictly observe the generally accepted HNWI definition – or set the bar for a professional relationship even higher – won’t be an option for those outside that earnings bracket. Asset management experts set such criteria much less often.

If the choice is yours – either because you meet the HNWI threshold or you’ve found a wealth management firm that’s less strict – you’ll want to closely consider the following factors.

Your Assets

Those with a wide range of assets, from liquid market equities to hectares of agricultural land, almost certainly need wealth management. Each asset type likely requires different protections and oversight. If you’ve amassed moderate earnings but they are mostly cash holdings, an asset manager may be a better choice for setting up a portfolio that diversifies and maximizes your capital.

Your Goals and Timeline

Financially speaking, how far into the future can you envision solid goals? A couple of years, or five? The next 10, or even further?

There’s no right or wrong answer per se, but it should inform your choice between asset and wealth management. If you want a strong foundation for your stock portfolio over the next two years but aren’t ready to plan further, you’ll likely work best with an asset manager. Conversely, if you have a decade or more mapped out for your estate, a wealth manager is your best choice.

Your Full-Service Advisory Firm

We’ve talked about asset management vs wealth management as a potential choice, but we also noted early on that it doesn’t have to be a binary.

At Elite Income Advisors, we provide integrated financial planning services: investment oversight, retirement planning, tax advisory, estate planning, and more. We address the full spectrum of financial management and can help you create a blueprint for a bright, secure future.