Almost everyone can benefit from the help of a financial professional, whether you’re budgeting, filing taxes or managing your investments. The question is what type of professional you should work with.
Two common professionals you may encounter are asset managers and wealth managers. While the two may often come together, wealth management and asset management are not the same. Each plays a distinct and important role in your financial management. Here’s what you need to know about the difference between asset and wealth management and how to determine which professional is right for you.
— Asset management vs. wealth management.
— What does an asset manager do?
— What does a wealth manager do?
— Do I need asset or wealth management?
— How to find an asset or wealth manager.
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Asset Management vs. Wealth Management
“Asset management is primarily the management of investments,” says Andrew Crowell, vice chairman of Wealth Management at D.A. Davidson. It focuses on the elements within your portfolio, such as which investments you use and when and how to rebalance them.
“Wealth management takes a much broader and more comprehensive approach to an individual’s financial picture and provides not just advice on investment management but also credit and debt management, estate planning, charitable giving, risk mitigation strategies, tax planning and more,” he says. It takes a holistic view of your financial picture to meet your needs and goals.
Asset management is an aspect of wealth management because managing your investments is an integral part of managing your wealth. “Asset management focuses predominantly on the cash, investment and retirement assets of the clients, with some inclusion of physical assets like real estate owned by the clients,” says Barry Mulholland, University of Akron’s financial planning director and lead organizer of Diversitas, a symposium dedicated to improving diversity in the financial planning and wealth management industry.
What Does an Asset Manager Do?
If wealth management were a comb, asset management would be the fine-toothed side. “An asset manager focuses solely on your assets, without really looking into the rest of your financial picture, beyond potentially some tax strategies to help minimize gains or taxable dividends or interest,” says Stacy Coffey, a certified financial planner and senior vice president of wealth strategies at Wealth Enhancement Group.
Asset managers often specialize in helping you choose and manage your individual investments. They help you determine which investments to use based on your desired rate of return, risk tolerance and capacity, Mulholland says.
What Does a Wealth Manager Do?
You can think of a wealth manager as a financial quarterback who can be hired to help ensure all the areas of your financial life get the “timely and focused professional attention they deserve,” Crowell says.
Compared to asset managers, wealth managers take a broader or more holistic view of financial management. This includes managing your individual assets, “while also coordinating the different pieces of your full financial — and often personal — situation,” Coffey says.
A wealth manager goes beyond just asset management and focuses on other issues, such as “taxes, retirement and education goals, risk management needs and any other financial planning issues that might arise,” she says.
A wealth manager can help you determine how much to save as well as where to put those savings, while an asset manager will just help you determine where to invest those savings.
Wealth managers also help you develop a personalized plan to guide you through your financial life. They’ll use a consultative approach to uncover your goals and craft a personalized strategy using a full range of financial products and services to meet those goals, says Mark Kravietz, a certified financial planner anda managing partner and founder of ALINE Wealth.
While focused on the financial aspects of those goals, wealth managers can also help you understand and manage the risks associated with your assets and how you can use these assets to maintain your lifestyle throughout your lifetime, Mulholland says.
“Wealth managers often act as a focal point for the planning process, referring the clients to specialists in areas of taxation, risk management and estate planning as needed by the clients,” he says.
Do I Need Asset or Wealth Management?
Whether you need an asset or wealth manager will depend on your personal needs or goals. If you’re only looking to have your money managed, then as asset manager would be best, Kravietz says. If you need a more comprehensive and complex analysis of your full financial picture, you’d be better served by a wealth manager.
Some experts, such as Crowell, would say everyone needs wealth management. “That being said, some people may feel that they can effectively manage many of the various aspects themselves or simply with the support of an estate attorney or CPA,” he says.
To determine if you need wealth management or asset management, Crowell says to take an honest assessment of how well you are managing your financial health. “Do you have a comprehensive plan that you are updating annually? With your many personal, professional and civic commitments, are you able to spend the time required to address all of these areas? Do you have the expertise and current information required to confidently manage each dimension?”
The answers to questions such as these can help you identify areas where you may need specialized attention.
Remember: When you get a wealth manager, you’ll be getting asset management too. “Your investments shouldn’t be managed in a vacuum,” Coffey says. “Even the most impressive portfolio growth can be eroded by taxes if those aren’t managed properly, and the savings you put aside for your children’s college educations might be diminished if your child loses access to financial aid because you saved in the wrong type of account.”
How to Find an Asset or Wealth Manager
There are several ways to find an asset manager or wealth manager. An easy place to start can be with referrals from family, friends or another professional you work with, such as your accountant or attorney.
“Trusted friends will generally be very forthcoming if they like and have confidence in members of their extended finance team,” Crowell says. He suggests asking how your friend found her manager and why she hired the manager. You can also ask what services and expertise the manager has and how he charges for his services.
“Conversations like this with folks that you respect and trust can help you decide whether or not you might benefit from similar services,” Crowell says.
You can also use resources such as the Financial Planning Association and Certified Financial Planner Board websites to find wealth managers near you.
Pay attention to the advisor’s credentials, too, as credentials can indicate “the knowledge of the advisor and possibly the ethical standards they operate under,” Mulholland says. “Watch for credentials that support high ethical standards, like the fiduciary standard, found in such designations as the certified financial planner (CFP) and certified public accountant (CPA).”
On the asset manager side, he says the chartered financial analyst, or CFA, designation indicates a high level of expertise.
When you’ve found a prospective financial advisor, be sure to “ask as many questions as you need in order to feel comfortable,” Coffey says. “When interviewing an asset or wealth manager, you should have full license to get clear and transparent answers on fees, how the person is compensated, their underlying investment philosophy and certifications or designations the advisor may or may not have.”
If at any point you don’t feel comfortable with the answers you’re getting or person you’re talking to, walk away and keep looking until you find someone you trust.
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Wealth Management vs. Asset Management originally appeared on usnews.com
