Investment management and wealth management are common services in the world of personal finance. They sound similar and are sometimes confused. In fact, they are completely different advisory disciplines.
Investment management focuses specifically on growing a portfolio of financial assets, whereas wealth management takes a holistic approach that includes investment management alongside comprehensive financial, tax and estate planning.
This mini guide will help you understand the distinction between these two financial services, looking at what they offer and when they are best used.
Investment management
Core focus
Investment management is concerned with building, monitoring and rebalancing an investment portfolio with the objective of maximising returns and managing risk.
Stocks, bonds, mutual funds and other assets are chosen to match your attitude to risk and your time priorities. The portfolio is reviewed regularly and rebalanced as markets move to make sure it stays aligned with your objectives.
Investment management can be delivered on an advisory basis, which requires you to approve each decision, or on a discretionary basis, in which the manager acts on your behalf within agreed parameters.
Main goal
The predominant aim is to generate financial growth and high returns from market investments. This must be done by managing risk appropriately.
Performance is usually measured against a benchmark, and success is judged largely on how the portfolio performs over time. Investment managers will issue regular reports on performance, costs and how the portfolio is positioned.
Best for
Investment management is suitable for individuals who only need help managing their investments and prefer to handle taxes, insurance and retirement planning on their own.
The service works well for those with relatively straightforward finances or who already have other professional advisers in place.
Wealth management
Core focus
Wealth management is a broad, all-inclusive strategy that covers every aspect of a person’s financial life.
Rather than looking specifically at your investments, it considers your full range of financial assets and liabilities, including pensions, property, business interests and cash. A wealth manager will often work alongside an accountant and a solicitor, with each professional complementing the others’ input.
Included services
Wealth management integrates investment management with a wider range of services, including retirement planning, tax strategies, estate planning, risk management and charitable giving.
Main goal
Effective wealth management preserves, manages and passes down wealth across generations.
While investment management focuses on growth, the emphasis in wealth management is on long-term security and the efficient transfer of assets, rather than just returns. For example, that might mean using lifetime gifts, trusts or pensions to reduce inheritance tax while making sure you keep enough to live comfortably.
Best for
Wealth management is best suited to high-net-worth individuals and families with complex financial situations who want a single adviser to coordinate all of their financial needs.
Typical examples include people approaching retirement with significant pensions and savings, business owners who have recently sold a company and younger clients who have received a sizeable inheritance and want it to work for the long term.
Would you like a more in-depth look at wealth management? Read our article, ‘What is Wealth Management?’, which walks you through exactly what a wealth manager does and how they differ from an asset manager.
Should you choose investment management or wealth management?
Which service is more suitable for you depends on how complex your finances are and how involved you want to be.
If your main concern is investment performance and you are confident managing everything else yourself, investment management may be enough. If you want joined-up advice where your investments, tax, pensions and estate plans all work towards the same goals, wealth management is likely to offer more value.
Hartey Wealth Management is your trusted choice for wealth and investment planning in Cheshire. Why not take advantage of our second opinion service? Call us on 0808 168 5866 for a complimentary review of your portfolio with no hidden fees.
