The Difference Between Asset Management And Wealth Management
Asset Management Defined
Many things are confusing when it comes to the financial services industry. Laden with industry lingo, you’ll hear such terms as portfolio management, asset management or total wealth management. You’re also probably familiar with the terms investment advisor, retirement planner, and financial advisor. Many people confuse these terms and even use them interchangeably. However, these managers and advisors couldn’t be more different in what they focus on and handle. This is particularly true with asset management, which is one of the most confusing terms and roles in the financial services industry.
In simple terms, asset management is all about coordinating and – you guessed it – managing your financial portfolio. Asset managers focus on how your portfolio is performing and work to keep your best interests in mind. Then, after decisions are made and investments executed assets managers will consistently evaluate your positions in an attempt to maximize your portfolio.
Often but not always, the terms asset manager and asset management are associated with high net worth individuals simply because they have many assets that need handling. In fact, there are firms that are dedicated to asset management, putting money into different investments according to a strategy of growth. These firms may also be fiduciaries.
Is An Asset Manager The Same As A Portfolio Manager?
The answer to this question is; sort of. Asset managers do manage portfolios. However, unlike dedicated portfolio managers, asset managers also can manage cash and other tangible physical assets like land, property, and items of value.
Like an asset manager, a portfolio manager handles your investments and other financial products that make up your portfolio. While you control where your money goes--on their advice--they put the money into the investment. As a team, you and the portfolio manager work to evaluate and re-evaluate how your money is growing and adjust your investments if needed. Also like an asset manager, it’s the portfolio manager’s job to analyze the market and make the most informed decisions about your money and investments. Their guidance should consider your comfort with risk, expected returns, individual circumstances, and financial goals.
The Difference Wealth Management Makes
While asset and portfolio management focus on one aspect of your financial life, a wealth manager aims to consider everything that affects your finances – including portfolio and asset management. Wealth management is important because our lives are not lived linearly. For example, you will not save the same in your 30’s as you will in you 50’s, and you will not spend the same in your 60’s as you will in your 80’s. There are times when you may need to spend more money, which is sometimes unplanned. Other times, you’ll earn more money than you were expecting or your financial situation changes because of an inheritance or other event. A wealth manager looks at all these scenarios and builds a financial strategy around the planned and unplanned circumstances that make up life.
To a wealth manager, there are many variables that affect finances and how you optimize your wealth. To optimize wealth means to look at your entire financial picture and make decisions based on where you’re at now and where you expect to be in the future. This is significantly different from portfolio and asset managers in that wealth managers take an in-depth look at your life and circumstances. Portfolio and asset managers, on the other hand, may only focus on maximizing the value of your portfolio instead of looking to optimize your total wealth.
As wealth managers and fiduciaries, we, at Vector Wealth Management, consider your life circumstances that can influence the allocation of your wealth. We look at over-saving versus under-saving, the retirement process (this is a process, not a date!), non-linear spending, personal values decision (assisting adult children, grandchildren, charitable inclinations), and tax/expense minimization, to name a few. We also factor in the percentage of assets that are available, looking at those assets that are pre-tax versus after tax so that there is a minimal impact on your tax return.
Wealth Management And Asset Management In Minneapolis
When it comes to managing your finances, including your financial assets, we believe that you ought to have a connection between your life circumstances and your wealth. At Vector Wealth Management, we build financial plans that reflect reality. This means managing your wealth and assets in a manner that has your best interests as the driving force behind every decision, as we like to say “Only and solely in your interest.”
CID: VWM15072023