Asset Manager vs Wealth Manager. Who Do I Need?

There’s no denying that financial jargon can be confusing at times. Are we in a bull or bear market? Does an investment have a headwind or a tailwind?

Some terms are also used interchangeably, even though they’re really quite different – take wealth management and asset management, for example.

Within these fields, you’ll encounter two types of professionals: asset managers and wealth managers. And although they may often work closely together, each plays a highly distinct role in managing your finances.

If you’re wanting to understand the value these individuals can offer you and your own finances, here’s further insight into what they do and how they differ.

Asset management or wealth management. What’s the difference?

Wealth managers (like myself) combine multiple aspects of your financial life such as estate planning, tax services, and philanthropic giving, into a consolidated and holistic plan. Asset managers, however, are hyper-niched down to focus solely on managing investments.

An asset manager will determine what investments to make or avoid in order to realise an investor’s financial goals within the limits of their risk tolerance. These investments may include stocks, bonds, real estate, commodities, alternative investments, and mutual funds, among the better-known options.

Although wealth managers provide portfolio management, they’re not monitoring those Bloomberg screens on a daily basis. No, that’s a job for asset managers, who will also look at past performance and management teams while monitoring technical, fundamental, and sentiment-driven trends to make the best investment decisions for their clients. Asset managers will also help determine the best investments to use based on a client’s desired rate of return.

Another important point to consider, is that asset managers also possess their own unique strengths and areas of expertise. For example, some asset managers are excellent at finding niche private equity allocations, while others are brilliant at deploying capital for growth. And then there are those who are particularly skilled at ensuring that your capital is protected.

Generally speaking, asset managers are an extension of the services we, as wealth managers, provide. They further support us as we endeavour to meet the needs of wealthy investors wanting to explore both local and offshore structures, markets, and investment opportunities.

A large part of what I do is working closely with reputable asset managers to ensure that my clients’ wealth is invested in a way that aligns with an all-encompassing financial strategy that I’ve developed with and for them.

Which is most suitable for my financial needs?

If you only need help with managing your investments, an asset manager should be able to provide everything you need. However, if that’s the case, you’ll still need to ensure that other aspects of your finances are managed by either yourself or separate advisors. An independent wealth manager is the best place to start if you want access to a financial professional who provides guidance regarding various financial topics. To reiterate, wealth managers offer an integrated solution while developing a personalised plan to guide you through your financial life. We will also employ a more consultative approach to create a strategy that uses a wide range of financial products and services to meet your goals – be it funding your grandkids’ education or creating a detailed retirement plan. Although wealth managers work closely with high-net-worth individuals, many asset managers will require a minimum level of investment, which could be more than you’re looking to invest. That said, if you possess a high level of wealth, there’s a good chance you may need both types of services. The good news is that many independent financial professionals and advisory firms generally offer wealth management and asset management mechanisms.

Why it’s important to use an independent asset manager

Different situations call for different advisors, but if you’re specifically looking to enlist the help of an asset manager, it’s important to use an independent provider. This is because independent asset managers have no binding partnerships with investment banks, for example, and are not forced to use certain service financial products. While some asset managers work in-house or in various fiduciary institutions, others choose to work independently to best serve a range of clients. The primary benefit of working closely with these types of asset managers is personalised attention. Compared to large private banks, which oversee a high volume of clients, independent management companies are owned by the consultants themselves, which leads to a more client-centred and mindful approach. Just remember that if you’re considering the services of an asset manager or wealth manager in South Africa, these individuals must be registered as financial service providers (FSPs) through the Financial Services Conduct Authority (FSCA).

The bottom line…

Ultimately, the decision between asset management and wealth management comes down to what you want out of a relationship with a financial professional. While asset management is a more technical approach to growing and preserving investments in financial instruments, wealth management takes a more holistic view of an investor’s overall wealth. From my experience, I know that many investors continue to feel unsure whether they should contact an asset manager in the first place, be it for their personal wealth or their business. Overall, asset management is a financial service accessible to all investors – even those who might not consider themselves high net-worth individuals.