Wealth managers and asset managers sound similar, but there are often differences in what these financial services firms provide for clients. In most cases, wealth managers offer holistic financial advice across multiple areas, while asset managers focus on investment management.
What’s the Difference Between Asset Management and Wealth Management?
Wealth management goes beyond investments and takes a big-picture view of your finances. According to Todd Pouliot, an Accredited Investment Fiduciary (AIF), from Gateway Financial, LLC, wealth management focuses on things like:
Risk management and insurance protectionLiability issuesRetirement planningWorkplace retirement benefit choicesStock optionsSuccession planningEstate planningTrust managementTax planningOther topics
“You need to see the bigger picture,” says Pouliot.
Fiduciary Status
When working with a financial professional, it’s crucial to understand your relationship. A fiduciary is legally required to act in your best interest, disclose and manage conflicts of interest, and meet other requirements. According to Curtis Bailey, a Certified Financial Planner (CFP), at Quiet Wealth Management, wealth managers are more likely to be fiduciaries, but asset managers might or might not serve as a fiduciary when working with you.
Compensation Models
When it comes to your money, you need to understand how much you’re paying and who receives compensation. Asset managers often get compensation based on the amount of money you invest with them, although there are exceptions. That compensation might be a commission from the money you invest or an annual fee charged against your assets under management. Wealth managers might also bill you based on the amount of money they manage, but other compensation models are available. For example, you might pay a flat annual fee, fees based on the complexity of your financial situation, hourly fees, or other types of fees.
Which Is Right for Me?
If you only need help managing investments, an asset manager might provide everything you need. In that case, you might manage other aspects of your finances yourself or hire separate advisors, such as estate planning attorneys or advice-only financial planners. According to Michael Caligiuri, a Certified Financial Planner (CFP), from Caligiuri Financial, LLC, you can expect to pay higher fees when you hire a wealth manager. That’s because you have access to a financial professional who provides guidance in a wide range of financial topics. If you don’t need guidance in non-investment-related areas, you might not need to pay those costs. A wealth manager can offer investment management, but you can expect advice on integrating your investments with everything else in your life. For example, you might want help managing your taxes, funding a grandchild’s education, and creating a detailed retirement income plan. Somebody who only provides investment management services may leave you wanting more.
Other Information
Sometimes names and titles are confusing or misleading. The U.S. Securities and Exchanges Commission doesn’t endorse any financial professional titles and also cautions investors not to rely solely on a professional’s title to determine their expertise. Bailey points out that some wealth managers primarily focus on investment management and they may not be able to address big-picture questions with you. Meanwhile, you might find asset managers that are capable of helping you navigate a wide range of financial topics. Pamela Horack, a Certified Financial Planner (CFP), at Pathfinder Planning, LLC, notes that these terms may be more interesting to people inside of the financial services industry than they are to consumers. “Clients only want to know what value you provide them,” she says. In addition to wealth managers and asset managers, other service providers might be appropriate for your needs. For example, a financial planner or financial advisor might be able to address all of the topics you need help with. Some firms may use alternative titles, but they offer services equivalent to the wealth management model described above. To find the right fit, research a financial professional’s background, designations, and disciplinary history, all of which can tell you a lot about who you’re working with.
The Bottom Line
Both asset management and wealth management services can help you with your finances. But if you want guidance on a broad range of topics, you may have better chances with a wealth management provider. Wealth managers typically offer investment management, and they can include additional services, as well. That said, titles don’t always tell you everything you need to know, so ask questions and review your service agreement to understand exactly what you’re getting. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
