Asset Management vs. Wealth Management

Both asset and wealth managers focus on managing investment portfolios on behalf of their clients. However, there are some significant differences between asset management and wealth management.¹

Asset managers primarily work on growing their clients' assets to maximize returns. Wealth managers have a broader focus and offer a range of financial services and advice aimed at helping high-net-worth individuals (HNWIs) manage their wealth and achieve their long-term financial goals. Read on to discover more differences between them.

An asset is a resource that's expected to produce a profit. Asset management involves managing a client's investments on their behalf in order to increase the worth of the asset(s). Asset management firms monitor market trends, make investment decisions and execute trades.

Assets can include real estate, stocks, bonds, businesses, patents or any other type of investment. Financial advisory has the leading share in the asset and wealth management sector. It alone is projected to be responsible for over $165.1 trillion in 2025. If this economic data is accurate, the total market volume of assets will be over $180.6 trillion by 2029.²

The primary goal of asset management firms is to invest their clients’ money in a way that aligns with each client’s risk tolerance, financial objectives and unique circumstances. Asset management focuses on putting a client’s money to work for them, and asset managers focus specifically on using their clients’ assets to further the client's interests.³

One of the reasons asset management is such a sought-after service is its relevance. A broad range of clients can benefit from asset management, from institutional investors with pension funds to individual investors interested in increasing their overall wealth to high-net-worth individuals for objectives ranging from active asset management to portfolio construction to retirement planning. They may work alone or as part of a larger asset management services firm. An asset manager may be referred to as a financial advisor, an investment broker or a registered investment advisor (RIA).

Asset managers usually charge a fee for their services. This fee is often a percentage of the assets they manage and covers the costs associated with managing the assets and providing support and advice to their clients.

Asset managers bring a variety of skills and abilities to their clients. They can adapt these techniques to fit the needs and objectives of each client, and each technique takes different forms.

Financial modeling is one tool that asset managers may turn to when managing investment portfolios. Asset managers forecast a future return on investments based on predictive algorithms and statistical models. This can aid their clients in many areas of personal financial planning. They also analyze market trends to identify investments and asset classes that best align with their clients' financial goals.

Risk management techniques help minimize the risks associated with investing. Risk management strategies can include diversification, which involves spreading out investments; hedging, which is investing in one type of asset to offset losses in another; and stop-loss orders, which involves automatically selling an asset at a predefined price. Asset managers will manage risk with strategies based on their clients' goals and risk tolerance.

Asset allocation strategies help investors build diversified portfolios made up of index funds or different asset classes that maximize returns and minimize risks. Asset managers may choose a mix of different types of assets, such as real estate or bonds and stocks, to ensure their clients aren't too heavily invested in one particular type of asset.

Financial analytics asset managers use financial software to analyze market trends, track the performance of financial instruments and other investments and identify opportunities for new investments. This type of software can include research on potential investments, as well as data analytics to try to predict future profit and portfolio management platforms that automate tasks related to managing investments.

Fundamental analysis is a specialized type of research that lets asset managers evaluate the future prospects and financial health of investments they're considering. They'll look at industry trends, financial statements, documents related to other financial instruments, reports and other economic data to evaluate companies for their growth potential.

Wealth management is a holistic approach to helping people with high net worth continue to grow their wealth and protect their current assets. It’s the highest level of financial planning services and includes a strategic plan and advice on multiple financial issues such as estate planning, asset management and tax strategy.

Although wealth managers work with financial assets as well, their scope is much broader. They also manage other aspects of their clients’ overall financial situations. Wealth managers’ goal is to protect and maximize their clients’ wealth over the long term. Wealth managers deal with more areas of clients’ finances than asset managers do. They help their clients with everything from financial planning to estate planning.⁴

Financial planning involves taking a structured approach to creating a comprehensive financial plan. A financial plan includes clients' goals, income, expenses, assets, liabilities, tax situation and risk tolerance.

A financial plan helps people achieve financial goals such as creating college funds, funding retirement or estate planning. It begins with the current financial situation and provides a roadmap for achieving short-term and long-term financial goals. A financial plan is an ongoing effort that will be monitored and revised as needed.

A significant part of wealth management is investment or asset management, which involves managing assets such as stocks and real estate to maximize returns.

Careful tax planning is a cornerstone of wealth management. An effective tax plan minimizes tax burdens with strategic planning. Tax plans identify potential areas of tax savings based on current tax positions, including deductions, income, credits and other factors.

Tax-efficient strategies are the heart of tax planning, with the goal of minimizing the amount of tax people will owe on their income, capital gains and other assets. Some common tax strategies include tax-loss harvesting or tax-advantaged investment vehicles.

Estate plans outline strategies for transferring money and other assets to one’s heirs. The details of an estate plan will depend on estate planning goals, which can include passing wealth to a person’s children and other relatives as well as charitable giving.

Estate plans include documents such as wills, trusts, investments and updated beneficiary designations. They need to be monitored and updated as financial situations and laws change.⁵

If you’re considering working with an asset manager or wealth manager, knowing the differences between asset and wealth management is an essential part of choosing the right service. While there is some overlap, each profession has distinct purposes, serves different clientele and offers specific services.

While asset management focuses on strategically allocating significant assets and managing investments like mutual funds, wealth management has a much broader scope. Wealth managers focus on a diverse range of services, including managing investment products and giving investment advice, legacy and estate planning, tax services and lifestyle management.

One of the primary differences in asset management vs. wealth management is in the breadth of services and scope of focus. Wealth management firms provide much more comprehensive financial advice, often with special wealth management teams for high-net-worth individuals.

Choosing between asset management and wealth management services largely depends on your individual needs and specific financial circumstances. If you need help managing investments, asset management is the right choice. Asset managers can function as investment advisors and portfolio managers and give guidance on investing effectively.

For a more holistic approach, including legacy planning and tax optimization, wealth management is the better option. It can help you manage risk more efficiently by taking every part of your larger financial picture into account.

Asset managers and wealth managers will use different approaches when working with clients. Asset managers focus on understanding a client’s risk tolerance, investment goals and goal timeline in order to develop a suitable investment strategy.

Wealth managers consider a person’s entire financial lifetime and circumstances. Wealth management typically involves broader factors like larger life goals, personal values and longer-term objectives. Instead of investment advice, wealth managers provided fully custom financial plans.

Asset management fees are generally charged as a percentage of total assets under management (AUM). Clients can expect to pay less for the services of an asset manager due to their comparatively limited range of service.

Wealth management, which provides much more in-depth and personalized services, is typically more expensive. Wealth managers may either charge a flat rate or, like asset managers, charge a percentage of a client’s total AUM. Specialized services will likely incur additional fees. There is some variance in asset and wealth management salary relevant to the range of services offered by each.

Though both professions involve a significant degree of financial expertise, you can expect different levels of service from each one. Asset management is concerned primarily with consistent portfolio performance, keeping tabs on a client’s financial health with regular financial reports and adapting to changing markets with an emphasis on investment outcomes.

Wealth management also emphasizes investment returns but is a much more in-depth level of service. A large part of wealth management involves a highly personalized approach that addresses a client’s total financial objectives. Wealth managers will work closely with clients by providing strategic reviews of financial events, planning for major life milestones and serving as a dedicated advisor.

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