Asset management vs. wealth management: What’s the difference?
- Asset management focuses on an individual’s investments so the portfolio is positioned to pursue stronger returns over time.
- Wealth management is more holistic and seeks to enhance and protect an individual’s overall financial health over the long term.
- Asset management tends to focus on investment expertise to manage a client’s investable assets.
- Wealth management teams may include a wide variety of experts in fields outside of traditional investing, such as attorneys and accountants.
Working toward financial goals can feel complex, and a qualified financial professional can help. Both asset management and wealth management offer support, but they’re not the same. Here’s the difference between the two.
Asset management and wealth management: Key differences
Asset management | Wealth management |
|---|---|
Scope | |
Asset management primarily focuses on the management of your investments, such as stocks, bonds and other financial instruments. | Wealth management typically accounts for your overall financial situation, addressing more than just investments by also considering things like tax planning, estate planning, retirement planning and more. |
Goal | |
Asset management seeks to improve returns on your investments through effective management and diversification of your portfolio using strategies tailored to your risk profile. | Wealth management focuses on improving and securing your overall wealth over the long term. This includes not just enhancing investments, but other aspects of your financial situation as well. |
Fiduciary duties | |
Asset managers’ fiduciary responsibilities can vary. While many are dedicated to their clients’ interests, the standard of care may depend on the services provided and how the professional is compensated. | Wealth managers may provide a broader set of services, and the standard of care can vary based on the relationship and services provided. In many cases, wealth management includes investment advisory services that may involve a fiduciary responsibility. |
Target clients | |
Asset management is oriented toward a diverse range of clients, including individuals with significant assets and institutional clients such as pension funds, endowments and corporations. | Wealth management typically serves individuals or families with higher net worth. Many wealth management services have minimum asset levels. |
Payment structure | |
Asset managers may be paid based on a commission structure or fees that are a percentage of assets under management (AUM). | Wealth managers may be paid a flat fee, a fee based on the percentage of AUM or a combination of both. |
What is asset management?
Generally speaking, asset management can refer to the oversight of any possession that an individual has that is of value to them. But in the financial arena, this term is used mainly to describe the management of an individual’s investments, such as stocks, bonds and other investments intended to grow their wealth.
The goal of asset management is to improve returns on an individual’s investments. In other words, your money is put to “work” in as efficient a manner as possible so it has the potential to grow over time.
“Asset management” and “investment management” are sometimes used interchangeably. In practice, firms may use the terms a bit differently: asset management may be used to describe managing a client’s overall investment portfolio, while investment management may be more specific – focused on managing a particular strategy, account or fund. In other words, an asset manager may be responsible for a broader view across a client’s investable assets, while an investment manager might be in charge of funds dedicated to a specific asset class, like stocks.
Plan for the future you want with J.P. Morgan Wealth PlanSM
Having a plan can help you achieve financial freedom. Get started on yours with J.P. Morgan Wealth PlanSM, an award-winning digital money coach in the Chase Mobile app® and chase.com.
What does an asset manager do?
The person or entity tasked with seeking to improve the client’s investment returns is called the asset manager. One of the key ways they do this is through asset allocation. As the term implies, this involves placing the client’s total investable assets among different asset classes. A simple allocation model is one where these assets are divided among stocks and bonds using percentages that fit the client’s risk tolerance and financial goals.
For example, if a client has indicated that they are risk-averse, then the asset manager might weigh the allocation mix more to bonds (which are generally less volatile than stocks), but if the investor is more oriented toward increasing the value of their overall portfolio, then that mix might skew more to stocks (which often have higher risk, but the potential for higher reward). Typically, an asset manager will rely on the analysis of historical data to make projections of the risk-return potential of the assets that would be best suited to the investor’s risk profile.
Asset managers may be registered as investment advisors, broker-dealers or both, depending on the services they provide. They may be paid through a fee based on AUM, commissions or a combination. Fee structures vary by firm and account size.
What is wealth management?
While the focus of asset management is on the investable assets of a client, wealth management’s focus is more holistic. In other words, it seeks to address the individual’s overall financial situation and provide strategies to enhance and protect their wealth over the long term. A simple way to differentiate between the two would be to state that asset management can be one part of a broader wealth management approach.
For example, a wealth management client may get guidance on insurance needs, an estate plan and education savings goals such as a college fund.
What does a wealth manager do?
A wealth manager typically combines investment management with financial planning and may provide – or coordinate – services such as tax planning, estate planning and retirement planning.
Because the scope is broad, wealth management teams may include specialists outside of traditional investing. For example, an estate plan may involve an attorney, and tax planning may involve an accountant.
Wealth managers are usually registered as investment advisor representatives and are paid either through a flat fee, a fee based on the percentage of AUM or a combination.
Frequently asked questions about the difference between asset management and wealth management
Financial assets, including securities, are financial instruments that hold monetary value, such as stocks and bonds. Financial assets can be bought and sold in a financial market like the New York Stock Exchange. This is in contrast to real assets like real estate.
Asset management focuses on managing investments – such as a portfolio of stocks and bonds – based on goals and risk tolerance. Wealth management typically takes a broader view of your financial picture, which may include investments plus planning areas like taxes, retirement and estate needs.
Wealth managers and financial advisors can overlap, but they may differ in the scope. A wealth manager often supports higher-net-worth individuals or families with more comprehensive, ongoing planning and portfolio management. A financial advisor may focus on a specific goal (such as retirement) or provide broader planning depending on the services offered.
Active asset managers actively buy and sell securities with the intent to outperform a financial benchmark, such as the S&P 500 index. The opposite case is passive asset management, which seeks to model a given index and match its performance. Value investing, for example, is one of many styles of active asset management.
Invest your way
Not working with us yet? Find a J.P. Morgan Advisor or explore ways to invest online.
