Asset Management vs Wealth Management
The finance niche is full of confusing titles and industry jargon.
And that’s the reason why it is often daunting to understand terminologies like asset management and wealth management, which are often used interchangeably.
This article sheds light on the differences and similarities between the two.
What is asset management?
Let’s start with some stats.
- “Singapore’s AUM (assets under management) rose by 15.7% in 2019 to reach $4.0 trillion or US$2.9 trillion”.
- Singapore reports 3.3% of global managed assets as reported by the Monetary Authority of Singapore.
So what is asset management all about?
As the name suggests, asset management in the financial services space refers to the management of assets. Assets comprise all types of financial holdings. These include stocks, mutual funds, equities, fixed income securities, real estate, global investments, ETFs, and cash.
The main aim of an asset management firm is to help its clients maximize returns from their investments. Asset managers utilize funds from the clients to invest in assets to achieve a stated objective, be it consistent yield generation or a targeted return.
Your asset manager can also help you distribute your assets into different investment options like stocks, bonds, and other growth products.
Aside from that, these firms recommend products that suit their clients’ objectives and risk appetite. Broadly speaking, there is no minimum benchmark for the value of assets to be managed, though certain asset management firms may be constrained by the type of clients that they can serve, due to regulatory considerations. The client base for asset management as a whole, is therefore, wide.
Most asset managers/firms charge a fee based on the percentage of assets that they are required to manage. Additionally, charging a performance fee is also a common practice here, to align investors’ interests with the fund manager’s.
What is wealth management?
Wealth management is a broader terminology that caters to affluent individuals (high net worth individuals), families, trades, or businesses.
The focus is to help the clients grow and plan their overall financial situation to meet their long term goals. The services may range from planning a client’s tax profile, estate matters, retirement, inheritance, finances, and even philanthropic activities.
Often, wealth managers extend their service to liaising with any necessary professionals whose services may be required in the process of serving clients’ needs.
A wealth management firm acts more like an advisory service. They work by analyzing your individual goals, family dynamics, assets, and your current financial situation. They will then craft out a detailed plan of action to meet your goals and objectives.
Wealth managers usually charge a fixed retainer fee. However, it is not unusual for certain wealth management firms to charge based on assets that they are managing as well.
Key differences between asset management and wealth management
The primary difference between the two terms comes from the level of services provided by each. While asset management focuses on making investment decisions based on funds provided by clients, a wealth manager oversees the client’s entire financial portfolio.
The former focuses on investments that increase the client’s ROI, while the latter deals with preserving and managing the client’s existing finances.
The following table provides a quick comparative analysis between the two:
| Wealth Management | Asset Management | |
| Definition | Refers to the management of all financial aspects of a client | Refers to the management of assets of a client |
| Scope | Broader
– Service extends to all aspects of wealth such as planning tax, retirement, and succession, as well as philanthropy – Liaising with professionals of all fields necessary to serve the client |
Narrower
– Service primarily focused on investments: analyzing portfolio, managing assets, recommending products |
| Main objective | Grow and preserve wealth | Maximize investment returns |
| Types of clients | High net worth individuals, families, trust groups | Individuals, businesses, any entity with assets to be managed |
| Types of assets | All classes of assets | Mostly financial investments such as cash, stocks, bonds, real estate, and alternatives |
| Compensation terms of firms or servicing manager | Retainer fee-based along with a fee for an asset under management; Can include asset management charges as well if services are engaged | Usually commission-based for product sales or management and performance fee for the fund manager |
Which is right for you – asset management or wealth management?
When it comes to choosing a financial service, there are no rules set in stone. Your goals are the foremost determinant when choosing between the two. Depending on the intent and objectives, the choice may vary between two individuals having similar finances.
If you are a high net worth individual, but your needs are limited to keeping your investments managed, an asset management firm may be sufficient.
However, if you need high-end advisory services and overall financial portfolio management, a wealth manager may be able to serve you better.
It is also important to mention that you do not always have to choose between the two. There could be instances where an asset manager’s investment insights could be used together with comprehensive wealth management advice.
Conclusion
A wealth management firm can include an asset management firm’s services, but vice versa is not necessarily true. However, depending on the scale and depth of the wealth management coverage, an asset management firm can provide more niche investment services.
As mentioned in the article, both services are crafted to enhance your financial circumstances. That said, before choosing one, it is imperative to understand your goals and personal requirements.
Other related articles:
- What is Wealth Management?
- 10 Game-Changing Wealth Management Trends in 2020
- Wealth Management – Why Singapore?
- 5 Reasons Wealth Management is Important in Today’s World
- Asset Management – What Is It And Why Do You Need It?
Co-Founder, Chief Executive Officer
Haruhito was the Executive Director of Marcuard Heritage Singapore Pte Ltd, a Swiss multi family office. He was instrumental in building up their European and Asian clientele base which comprised of a global network of asset managers, distribution partners, and legal & tax specialists. Prior to that, he held various positions for 10 years in Deutsche Bank where he gained extensive experience in various Asian markets.
Haruhito has been accredited as a Trust and Estate Practitioner (TEP) by STEP, and as a Financial Industry Certified Professional (FICP) by Singapore’s Institute of Banking and Finance. His vision for Salzworth is to steer it to establish multi-asset class portfolios and funds that seek to achieve steady returns for investors.
