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Financial Planning vs Wealth Management: Key Differences

Financial Planning vs Wealth Management: Key Differences

Wealth management and financial planning are entirely different concepts despite having overlapping characteristics. Many people consider them a single thing; instead, they are two faces of personal finance coin. We will discuss wealth management vs financial planning in detail in this article.

Both wealth and financial planning aim to achieve financial stability through different activities. Likewise, they may use similar approaches or other methods to develop individual financial strategies for a better future.

However, one of the most significant differentiating factors between wealth management and financial planning is that the former focuses on long-term objectives. At the same time, the latter deals with specific short-term goals.

Furthermore, both are essential to sound financial strategy. However, these vary depending on one's objectives. There are professional wealth managers and financial planners who help their clients analyze and select the best financial decisions.

So, let us move on to study each in more detail.

Wealth Management

Wealth management is preserving wealth and growing it over the long term. Generally, affluent individuals and business aspirants adopt wealth management techniques. Likewise, wealth management involves using multiple financial products and services.

Moreover, wealth management involves long-term financial activities like capital gains, estate planning, and risk and tax management. Furthermore, mutual funds, bonds, property, gold, etc, are investment avenues for wealth management.

Wealth management offers the below-mentioned benefits.

  • A comprehensive approach to managing finances
  • A focus on the long-term growth of assets
  • Highly customizability to meet individual's goals
  • Option to involve and interact with professionals
  • Benefits covering a long-term  

Financial Planning

Financial planning targets short-term economic goals by synchronizing an individual's plans accordingly. We do financial planning daily, like managing our daily expenses and bargaining. In short, financial planning helps individuals examine goals and prioritize savings and investment decisions.

Financial planning includes cash flow, debts, risk, and contingency fund creation. Likewise, it uses financial products such as mutual funds, insurance, and fixed-income schemes.

Financial planning generally provides the following benefits.

  • Low fees
  • Improved control over short-term investments
  • Better financial health and awareness
  • Enables individuals to set financial goals and track progress
  • Organized finances for improved economic benefits

Differences between Wealth Management Financial Planning

Wealth management vs financial planning are concepts that complement each other, but many individuals need to learn they are significant differences.

Wealth management is a holistic idea, while financial planning targets specific goals. Therefore, your financial planning must resonate with your wealth management objectives. 

Let us review the key distinguishing factors between the two.

  • Period

As stated previously, wealth management is a broader term, and hence, it covers long-term financial aspirations, like the ones that will influence objectives spanning more than ten years.

Financial planning addresses an individual's short- to medium-term financial goals.

  • Management Type

Wealth management is an active process for an extended period of financial monitoring. In comparison, financial planning is a passive process that occurs twice a year.

  • Monitoring

Wealth management requires extensive monitoring; you may even have to appoint an expert for professional advice.

On the contrary, financial planning generally does not require professional advisory, and individuals can manage these processes independently.

  • Costs

The costs of managing wealth are higher than financial planning costs. Since long-term projects require proper monitoring and continuous investment, fees are relatively higher. Likewise, wealth management requires professional advice, which adds to its overall management cost.

Financial planning is making day-to-day decisions about your expenses and income. Hence, it involves low costs as you can easily make such decisions independently.

  • Applicability

Wealth management targets individuals with high net worth and significant wealth to maximize and protect existing wealth. 

On the other hand, financial planning suits an individual looking to save hard-earned money and invest it to meet financial goals.

  • Scope

Wealth management deals in accumulated wealth and its investment decisions for high-yielding returns. It has a broader scope and helps maximize a large wealth pool's long-term profits.

Financial planning is managing day-to-day financial decisions, like expenses, income, and tax planning. Thus, financial planning helps to develop a roadmap to reach desired financial goals.

  • Portfolios

Wealth management limits risk tolerance assessment, maximizing wealth strategies, preservation, and asset allocation decisions.

Financial planning includes reviewing and making investment decisions in cash flow, taxation, retirement, and contingency requirements. 

Hiring an Expert

Since wealth and finance, planning is not everyone's piece of cake; hence, seeking professional advice is critical to achieving desired results.

There are professionals like wealth managers and financial planners who can develop and help you implement financial strategies based on your financial goals.

Generally, a wealth manager costs more as he has to work on several options to analyze and produce the final choice. Financial planners are ideal for single financial decisions; hence, they charge less.

If you are looking for a financial or wealth manager, here are vital things to consider before deciding.

  • Experience
  • Fess
  • Credentials
  • Reputation 

Frequently Asked Questions

Is financial planning only for the rich?

No! Financial planning is for every person. No matter your financial position, planning is critical to achieving your short- and long-term aspirations. Individuals from all class levels should take a keen interest in making financial decisions that resonate with their life goals to achieve them.

What should I select – a financial planner or a wealth manager?

If you are a beginner, a financial planner is a better option since it does not involve complex financial decisions. Contrarily, if you have accumulated substantial wealth and want to preserve and maximize yields, you must appoint a wealth manager.

Is there any difference between wealth management and estate planning?

Wealth managers help their clients preserve and build their wealth for the future and descendants, while estate planners advise clients on ways to dispose of their wealth.

Is financial planning a part of wealth management?

Financial planning is separate from wealth management as it only deals with day-to-day financial decisions and has a limited scope. In contrast, wealth investment is the development of a comprehensive roadmap for financial gains. 

Is a wealth management career worth it?

Wealth managers usually earn high earnings, especially those with extensive experience and a solid customer base. Therefore, wealth management is a good career path for new aspirants.

Parting Thoughts

Many people need to distinguish wealth management vs financial planning. Although both look the same, they have significant differences.

One significant difference is that wealth management focuses on the longer term, while financial planning helps individuals with short-term financial decisions. Moreover, wealth management suits an individual with significant assets, while a beginner must focus on financial planning.

Likewise, both sets of experts in the market wealth managers help people achieve their long-term financial aspirations. In contrast, financial planners support their clients in making the best possible decisions to meet small to medium financial choices.

However, both wealth and financial planning are critical to achieving financial goals. You must pay attention to all these to get to your dream position. So, long- and short-term planning is essential to crossing the finishing line. 

With this, we conclude our discussion on wealth management vs financial planning; we hope you enjoyed reading it; please leave feedback in the comments section.

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