What is the difference between portfolio management and wealth planning?

Those seeking assistance to grow their nest egg and make the most of their financial circumstances will find numerous different types of financial advisors on hand. Employing their expertise can be exceptionally advantageous to any person wishing to attain a specific financial ambition or investment objective. However, it’s important to understand the kind of services that are offered by financial professionals if you’re to meet your short and long-term goals.

Have you ever wondered “what is the difference between portfolio management and wealth planning?” Wealth planning and portfolio management are two different services offered in the financial sector, but they are not as interchangeable as many mistakenly believe. Wealth planning is the ongoing development of a client’s wider financial aims, and it involves constructing an action plan that can achieve them. Portfolio management is a more specific process and involves the creation and maintenance of an investment account.

In the next sections, we’ll take a closer look at these two different financial services and what they offer clients.

How do you define “portfolio management”?

Essentially, a portfolio is a term used to describe a selection of different financial assets. These might be binds, commodities or stocks, mutual or exchange-traded funds or, sometimes, cash equivalents. The process of portfolio management is concerned with making decisions and taking actions regarding these selected investments and ensuring there is an appropriate mixture. Portfolio management also looks at allocating assets and how to balance potential against the way they are estimated to perform.

Effective portfolio management will also work out the different weaknesses, strengths, opportunities and threats regarding the group of assets, as well as their performance with portfolio managers, making the optimum selection in order to maximise the possible returns from them.

How does portfolio management work?

Many people see portfolio management and wealth planning as similar services, but this is not the case. Portfolio management is focused on the creation and management of an individual’s investments. It is primarily conducted by a professional portfolio manager, who will handle the management of the portfolio of investments on behalf of others. Portfolio management is always guided by the key goal of maximising the return of the selected investments purchased by the individual, while at the same time managing the potential risk, ensuring it remains as low as possible.

Typically, portfolio management falls into two separate categories: active or passive. The term “active management” is used to describe circumstances where a single portfolio manager or a dedicated team of portfolio managers will manage the fund for their client by investment research and decision making. “Passive management”, on the other hand, is used to describe the process of portfolio managers establishing a set strategy and maintaining it for the long term. Passive portfolio management is also known as “index investing” and “indexing”.

How do you define “wealth planning”?

Compared to portfolio management, wealth planning is a broader term and concerns the management and enhancement of an individual’s financial situation overall, with the aim of helping to protect their financial wealth. It is service used not just by individuals, but enterprises and organisations as well. Wealth planning can comprise all financial aspects of an individual’s circumstances, such as daily financial planning, tax planning and accounting, estate planning and preparing for the future with retirement planning. Wealth planning can even include portfolio management as a service.

How does wealth planning work?

Wealth planning is more concerned with integrating the different areas of an individual’s finances and various pieces of advice from a selection of experts, like the client’s accountant or lawyer. Wealth planning takes a holistic approach, with the wealth manager coordinating their professional services so that money is managed effectively to meet a set plan that answers both the present and future financial needs of the individual they serve.

A wealth manager will form a plan designed to efficiently increase their client’s wealth informed by numerous factors, like their present financial situation, future goals and their attitude towards risk. The wealth manager creates a plan that is then continually updated and reviewed periodically, ensuring that a financial portfolio is rebalanced when required.

How do you select the right financial service for your needs?

Portfolio management and wealth planning might seem to be interchangeable to the uninformed, but as you can see, they are two different services. If you are seeking a financial expert to create an investment plan for you and who will assist you in generating the maximum return from your assets while lowering the potential risks, a portfolio manager may be a suitable solution.

However, you should choose a wealth planning service if you are looking for more comprehensive management of your finances that will incorporate all aspects of your circumstances. A wealth manager will take a broader overview of your finances, considering how they work together and impact each other to help you make the most of your current wealth and make sure you hold onto it for longer, with effective management and informed decision making.

While the two separate services can both offer you advice on financial assistance and growth, you may find you require just one of these options or both, depending on your present situation and financial ambitions.

Do you need assistance with portfolio and wealth management in Shropshire?

You might be looking for an impartial eye on your current portfolio or you may be looking for a more comprehensive service that incorporates all aspects of your finances, but either way, you can rely on Hartey Wealth Management for assistance. If you’ve been considering “what is the difference between portfolio management and wealth planning?”, you may be unsure what type of financial assistance you require.

Get in touch with our expert team today and we’ll take a look at your current finances and advise you on the best way to achieve your short and long-term financial goals. We can help you select the best solution, whether that’s a wealth planning service or portfolio management.


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