Asset Management vs. Wealth Management: What’s Right for You?
The main difference between asset management and wealth management is that asset management is limited to growing client money through investing, whereas wealth management is a broader concept that includes investing, tax, estate management and succession planning.
Another difference is that almost everyone can avail asset management whereas wealth management is reserved for the super wealthy AKA UHNIs (Ultra High Net worth Individuals).
Note: ‘Asset management’, ‘wealth management’, ‘portfolio management’ and some other terms are often used interchangeably, even by the companies providing these services. However, there are many distinctions among these financial services.
Let’s look at the concepts of asset and wealth management and who provides them. Then we will look at the differences between the two.
What is Asset Management?
Asset management refers to buying and selling securities like stocks and bonds to grow client money as per the protocols set by asset managers or asset management companies (AMCs).
In India, the major asset management companies are mutual fund companies. They provide:
- Services to everyone (minimum investment: Rs. 100)
- Multiple options through various mutual fund schemes
- Management/growth of your money when you invest in their schemes
However, this is where their responsibilities end. Asset management companies are not responsible for other financial aspects like tax and retirement planning.
You need to seek the services of a portfolio manager or a registered investment advisor who can help you with multiple financial aspects.
If you have substantial wealth (Rs. 5+ crore), then seeking the services of a wealth management company makes sense.
Examples of Asset Management Companies in India
As we saw, asset management companies in India are majorly mutual fund companies that grow your (client) money by investing it in stocks and bonds.
However, other fiduciary entities that help you grow your money through investing also are technically asset management companies.
These include Portfolio Management Services and Research Analysts that don’t provide personalized investing services.
If an entity provides personalized or customized investing services, it is no longer asset management and we enter the world of portfolio management.
Here are some examples of asset management companies in India:
- HDFC Mutual Fund
- ICICI Mutual Fund
- SBI Mutual Fund
- Mirae Asset
- Parag Parikh Financial Advisory Services (PPFAS)
What is Wealth Management?
Wealth management is a holistic range of financial services offered to UHNIs that includes:
- Investment advisory
- Private banking
- Tax planning
- Real estate planning
- Financial goals (like retirement) planning
- Succession/inheritance planning
In India, wealth management can be availed by folks with net worth of more than Rs. 5 crore. However, this is not a rule and has many exceptions in the wealth management industry.
The biggest advantage of engaging with a wealth management company is that the single entity can provide various financial services and products. You will not need to deal with any other person or company for a financial service or product.
Examples of Wealth Management Companies in India
In addition to serving wealthy individuals and families, wealth management companies may offer CFO-esque services to corporations. These include treasury management, ESOP planning, corporate financing by issuing debt/stocks etc.
Here are some examples of wealth management companies in India:
- Nuvama Private
- Kotak Private
- Waterfield Advisors
Asset Management vs. Wealth Management
|Aspect||Asset Management||Wealth Management|
|Financial services covered||Management and growth of money by investing it in stocks, bonds and other assets||Investment advisory, tax planning, real estate planning, succession planning, retirement planning etc.|
|Offered by||Asset Management Companies and at times by Portfolio Management Companies||Wealth Management Companies|
|Offered to||Everyone||Ultra High Net worth Individuals and sometimes even corporates|
|Minimum investment/net worth required||Rs. 100||Rs. 5+ crore (may vary depending on the wealth management company)|
|Service provider regulated by||The SEBI (Securities Exchange Board of India)||Regulated by multiple authorities since a holistic range of services is offered|
|License(s) required to provide the services||Mutual fund licence, Research analyst licence or Portfolio manager certificate (for PMS)||Multiple licences related to investing, insurance, banking etc. may be required depending up on the number of services being provided|
|Advantages||Tightly regulated industry, affordable (1% fee) and many options available to diversify across various financial service providers||Well regulated industry, single point of contact for all financial services that UHNIs will ever require|
|Disadvantages||Not personalized to your needs and risk tolerance||Expensive (2+% fee) and since only a single entity is engaged for multiple financial services it may not always act in your (client) best interests|
Should you go for Asset management or Wealth management?
As we noted earlier, terms like asset, portfolio, and wealth management are used interchangeably.
The important thing to remember is to use your judgement and do some basic research to understand the range of financial services required for your situation.
Asset management, in isolation, is not very helpful. This is because you may end up investing in instruments that may not suit your needs and risk tolerance.
If you need to invest your money under someone’s guidance, approach an investment advisor or a portfolio manager who can help you invest in a portfolio customized for you.
However, if you have substantial wealth (Rs. 5+ crore) that needs deeper planning, approach a few reputed wealth management companies. Try to understand their services, scope and fees and then make an informed decision.