A good money manager does not only look at stocks or savings. One must also consider the complexity and the future of their financial needs. For this reason, the services from both wealth management and investment management come into play. Although both terms are used interchangeably, there are differences in how both services are approached in terms of financial strategy.

In both cases, the services provided and the range of options available in the long term are influenced by the individual's financial goals and level of assets in the future.

What Is Wealth Management?

Wealth management is a comprehensive financial advisory service that encompasses almost every area of a client’s financial life. Wealth management goes beyond investments and focuses on the strategic construction, preservation, and eventual redistribution of wealth.

Wealth managers usually also engage in:

• Coordination of estate planning
  
• Insurance planning
  
• Holistic business risk planning
  
• Retirement and philanthropy planning
  
• Management of investment portfolios
  

In contrast to many investment managers, wealth managers focus on the “big picture” and see beyond investment returns. They devise a strategy that combines financial planning, tax effectiveness, and a legacy to create a cohesive strategy.

Given that there is generally a preference for larger institutions, wealth management divisions that are dedicated to services offered to families and individuals with a high net worth exist at many large financial institutions, including JPMorgan Chase and Goldman Sachs.

Who Usually Uses Wealth Management?

• High-net-worth individuals
  
• Business executives
  
• Families who plan to pass on wealth
  
• Individuals with complicated tax or estate issues
  

Wealth management becomes especially useful when finances become layered and require oversight management.

What Is Investment Management?

Investment management is more narrow and focused. It is primarily about managing investments to meet set goals.

Investment managers focus on:

• Asset allocation
  
• Stock and bond selection
  
• Mutual funds and ETFs
  
• Risk management in portfolios
  
• Portfolio evaluation
  
• Portfolio adjustment
  

The primary goal is to attain the highest return with the least amount of risk based on the client’s time frame and risk tolerance.

Investment management services are offered to individuals and institutions by global asset management firms such as BlackRock and Vanguard Group.

Who Usually Uses Investment Management?

• Individual investors
  
• Holders of retirement accounts
  
• Institutional investors
  
• Clients who want portfolio growth without the need for comprehensive financial planning services
  

If the primary objective is to grow an investment portfolio instead of aligning other estate or tax planning, investment management could be enough.

Wealth Management vs Investment Management

Both services relate to investment; however, the nature and extent of services offered differ a great deal.

Scope

• Wealth Management: Holistic financial strategy
  
• Investment Management: Portfolio-focused
  

Services

• Wealth Management: Investments + tax + estate + retirement
  
• Investment Management: Asset allocation & security selection
  

Client Base

• Wealth Management: High-net-worth individuals & families
  
• Investment Management: Individuals & institutions
  

Objective

• Wealth Management: Long-term wealth preservation
  
• Investment Management: Risk-adjusted return optimization
  

Planning Level

• Wealth Management: Complex & integrated
  
• Investment Management: Investment-specific
  

Simply put, wealth management has more to it than just investing; investment management is a part of it.

Approach and Strategy Differences

1. Big-Picture Planning vs Portfolio Focus

Wealth management considers all aspects of your finances. It looks to see how all of your investments fit within your tax plan, estate plan, retirement income, and the risks you are taking.

Investment management looks mostly at how to grow your money the best. It focuses on questions like:

• What mix of stocks and bonds is appropriate?
  
• How should the portfolio be diversified?
  
• When should assets be rebalanced?
  

2. Complexity of Financial Needs

If your financial life includes multiple sources of income, owning a business, trusts, or estate planning concerns, wealth management is best suited to integrate complex strategies and address all aspects of your situation.

If your situation is more simple, such as contributing to retirement accounts and long-term investments, investment management may be a better fit.

Fee Structures

Both types of services typically charge fees based on assets under management (AUM). However, wealth management fees tend to be higher because of additional services offered.

Typical structures include:

• Percentage of assets under management
  
• Flat advisory fees
  
• Tiered pricing models
  
• Performance-based fees (in some situations)
  

In order to select an advisor, review fee transparency, fiduciary obligations, and scope of services.

Which Service Is Right for You?

Choose Wealth Management If:

• You have an integrated financial approach
  
• You have concerns with estate or tax planning
  
• You are a business owner
  
• You are interested in wealth strategies for multiple generations
  
• You need risk and insurance planning integrated with your other plans
  

Choose Investment Management If:

• The main goal is growing the portfolio
  
• You desire professional asset allocation
  
• Your financial situation is simple and you prefer something less expensive
  
• You want a more targeted, straightforward, and greater value approach
  

In many situations, wealth management services include investment management services. The most significant contrast is in the range of services and the amount of financial coordination.

Frequently Asked Questions (FAQ)

1. Is wealth management only for the ultra-wealthy?

Not usually. While it has traditionally catered to high-net-worth individuals, a growing number of advisory firms have started providing wealth management with a variety of minimum asset requirements.

2. Can retirement planning be a part of investment management?

Some investment managers give limited retirement advice, but planning how to receive income from a retirement account is usually done by wealth managers.

3. Do both services have a high minimum investment?

Minimums vary by company. Wealth management services usually have higher minimums than investment management.

4. Which is the most economical option?

Investment management is usually the most economical option because it is focused on a smaller range of services. Wealth management is more expensive because it offers a greater range of financial advisory services.

5. Is it possible to move from investment management to wealth management at a later time?

Certainly. Many clients start off with investment management, and as they gain more assets and their financial situation becomes more complex, they move on to wealth management.

Final Comments

Wealth management and investment management both seek to grow and protect financial assets, but their scope and strategy are very different.

Wealth management is likely the better option if you want a complete financial overview that brings together investments, taxes, estate planning, and your long-term legacy goals. Investment management is likely to be a good option if your priority is to build and manage an investment portfolio in the most efficient way.

The right choice depends on how complex your financial situation is, what your long-term goals are, and how much guidance you want.