What does it mean to have wealth? When people speak generally about wealth, they may tend to think of immediate access to large sums of personal cash at a bank. However, it doesn’t usually work that way. When a wealthy person needs to withdraw large sums of cash from a personal money market or savings account, it can be an involved process. There may also be additional checks for security reasons due to anti-terrorism laws. High net worth (HNW) individuals must sometimes wait for the bank to temporarily generate additional liquidity or place a phone call to sell shares of their money market fund in order to access cash. For these reasons, smart wealthy people don’t usually have large sums of uninvested cash sitting in bank accounts—moreover, money that sits is lost income.
HNW individuals typically diversify their portfolios to counter these issues, and they usually do it with the help of investment managers. But, investing is only one aspect of finances, and there are many individuals who may benefit from more comprehensive advising when it comes to their wealth. With all of this in mind, you may find yourself wondering what’s best for you when it comes to wealth management vs investment management.
Wealth Management vs Investment Management: What’s the Difference?
At first glance, wealth management vs investment management seems like redundant terminology. We hear so much about financial advisors and planners and wealth managers that we can quickly feel supersaturated with information. At some point, you might have even told yourself, “What’s the difference, they all work to invest people’s money!” This information overload comes with a big risk, though: Inaction. If it all starts to sound the same, you may end up choosing to just keep all your money in a savings account, thinking it’s the best or safest option.
Don’t let yourself fall into this trap. With a bit of education and analysis, you can easily get a handle on the basic terminology of financial planning and you will quickly realize that wealth management has a unique distinction over choosing investment management alone. Here’s a simple guide to the differences between these two methods.
Investment Management: A More Limited Option
Investment management is more limited in scope than wealth management. Investment managers have a list of products they can make recommendations from and help you manage your risk when allocating capital across asset types including:
- Money markets
- Fixed incomes
- Mutual funds
- Alternative investments
An investment manager will advise on setting up instructions for investment, reinvestment, and divestment of capital. Their job is to review the performance of your investments on a quarterly basis, at a minimum, and identify new opportunities for you to earn more income and to reduce the impact of any losses.
Are you income- and investment-savvy already? Do you read about modern portfolio theory or composite theory? Do you regularly monitor your assets? If you already consider yourself a bit of an investment pro, that’s excellent! You are ahead of most, and an investment or asset manager can help you fine-tune your investment strategy so that it is exactly in line with your goals and preferred financial strategies.
Wealth Management: A More Hands-On Approach
While investment management may be all that is required for certain groups of individuals, there are many cases where a more comprehensive approach to financial planning will be helpful. For example, those who gain high net worth through career growth or those with inheritances or trust funds are two demographics that can often benefit from examining their finances more holistically. Those who gain wealth over the course of their employment don’t necessarily have instant access to all the advice they need to make the wisest financial decisions. Even those who have received an inheritance through a trust fund can’t fully rely on advice that was “grandfathered in” through their family’s principal advisors or family attorney.
The fact is, whether or not you have a trust fund, your financial needs will be different than those of your parents. What worked for previous generations is changing, and new approaches are much better suited to smart financial planning today. Wealth management takes a more complete approach to your financial future, beyond just investments. Your wealth advisor will look at multiple life-building goals with you, including:
- Tax planning
- Estate planning
- College savings
- Life insurance policies
- Retirement planning
You will work together to ensure that your regular income and investment income are strategically allocated so that you are on the track to have what you need when you need it. In the event you need to generate cash from your investments, a wealth manager will review how your investments are performing and make a recommendation on how to divest from your funds in a way that will have the least impact on your overall portfolio in terms of fees and performance trajectory. A wealth manager can also help you to set a date on when to replace divested capital.
How Do I Get Started With Wealth Management?
When you have solid wealth management, you have partnered with a professional who will ensure that you have the tools in place to chart a steady course for your financial future. Wealth managers aren’t just selling from a list of designed products. They have more options at their disposal, including attorney and accounting resources for estate and tax planning. With wealth management, you gain a team of professionals who will collaborate on your behalf.
SD Mayer professionals extend their undivided attention to every client, every time. Our holistic approach doesn’t come from just making sure you have insurance policies and accounts for estate planning, college, and retirement. The products and services we offer also mean staying abreast of family, career, and life changes. There’s no need to feel so frustrated that you get stuck in a rut where you feel like your finances aren’t dynamic and your money is just sitting in the bank. We’ll help you decide on tactical adjustments to your investment plans whenever life changes occur, when they are good or not so good, and we will be with you every step of the way as you achieve your financial goals.
At SD Mayer, we give you a realistic view about how much income you need to put away now to grow your money into more future wealth. Whether you are looking for specific investment management or more comprehensive wealth management, our team can provide the type of advising best suited to you. In fact, we’d like to invite you to have a chat with us, over the phone or by contacting us online today.
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SECURITIES AND ADVISORY DISCLOSURE:
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Fee based planning offered through SDM Advisors, LLC. Third party money management offered through Valmark Advisers, Inc a SEC registered investment advisor. 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431. 1-800-765-5201. SDM Advisors, LLC is a separate entity from Valmark Securities Inc. and Valmark Advisers, Inc.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
The examples given are hypothetical and for illustrative purposes only.