Engaging a financial advisor to guide you on your financial journey is an important decision; equally so is understanding whether you need investment management or wealth management services.
To determine which solution is most appropriate for your situation, the biggest determinants are not necessarily your age or portfolio size – although they can play a role – but rather, your goals and the complexity of your financial circumstances.
At a high level, if you are only in need of prudent investment advice, then you are likely looking for investment management. If tax, insurance, estate planning or retirement income planning are factors in attaining your financial goals, wealth management services may be a better fit.
Investment Management: Strategies for asset allocation
An investment management strategy will help you understand the amount of risk and diversification your portfolio should have, based upon:
- Your professional stage of life
- Your personal stage of life
- Your financial stage of life
- Your long-term goals and objectives
Typically, young adults are good candidates for investment management. This demographic typically has not accumulated a great amount of wealth and may need guidance on how to properly allocate funds to set them up favorably for the long term.
Other candidates may have established portfolios that are not delivering sufficient returns throughout retirement, or they may question whether their strategy is consistent with their objectives. A financial advisor can help these clients establish an investment portfolio designed to grow or preserve their savings.
Wealth Management: Planning for the long term to meet your financial objectives
You should consider wealth management services when your financial needs turn from wanting to obtain a sufficient return on investments to wanting to leverage those returns and investments to fund your retirement.
Wealth management takes a holistic approach to planning and budgeting to help you reach a point where you can live off your investments. It tends to deal with more complex situations and financial-related issues, including:
- Distribution Strategies: Distribution of your investments and income in a way that allows you to meet your retirement goals. For example, if you have a pension and are eligible for Social Security, which is the best method for distributing that income to cover your monthly expenses?
- New Lifestyle Goals: With your retirement, you may want to consider new lifestyle goals. Perhaps in addition to retiring to a beach house and leaving an inheritance to your children, you also want to travel and create a charitable trust for your favorite non-profit.
- Changes in Financial Obligations: Sometimes in retirement, you are faced with unexpected financial obligations. For example, you may need to provide considerable financial support to a child or family member or deal with the associated costs of a long-term illness.
All of these situations can impact your financial plan, and to properly address them requires deliberate decision making and resourceful financial management. Your financial advisor, often working in concert with your attorney, CPA, and other advisors, will devise a plan that addresses all of these factors while working to keep your wealth management goals and objectives intact.
Choosing the service that’s right for you now…and later on
Investment management and wealth management services are designed to work in conjunction over the long-term. They are collaborative approaches to creating and sustaining a financial well-being that will meet your goals and objectives.
While they can be mutually exclusive services, you may find yourself segueing from investment management to wealth management as you get closer to retirement or as your financial situation grows more complex. If you are unsure, or if you would like a clearer understanding as to whether investment management or wealth management services are a better fit for you, talk to your financial advisor.