What is wealth management?

Financial planning vs wealth management 

It can be difficult to know how best to utilise your wealth to finance your life’s goals. As your wealth grows, so can your expectations of what you want to achieve, and you may worry whether you are making full use of your assets to improve the chances of attaining all your objectives. The good news is there are specialists that can help, but are you better off seeking advice from a financial planner or an investment manager?

You are likely to have more than one objective: having a certain lifestyle in retirement, providing financial security for your family, having the financial freedom to choose whether to remain in the workplace, safeguarding your wealth for the next generation. Financial Planners will help you to prioritise these, and once the order of importance is established, look at how best you can meet your objectives with the resources available to you such as your existing assets, future funding capacity, and time horizon.

How should I invest my money?

A financial planner will highlight possible events that could disrupt your ability to achieve these goals and challenge you to consider the consequences of failing to meet these objectives. The strategy will then consider to what extent these risks are reduced, minimised, managed, or transferred in line with your appetite and capacity for risk.

Investment wrappers (ISAs, pensions, offshore bonds) and legal structures (trusts and investment companies) are useful tools a financial planner could use, each with features that could provide you with the desired level of access, flexibility, and control over your money, while limiting some of the tax drag on investment growth. On establishing the right balance between retaining sufficient liquidity for short-term needs and how to allocate the remaining funds to meet longer-term aims, the plan to meet your objectives should be broken down into steps, considering debt management, effective use of personal tax allowances, and appropriate investment wrappers while being mindful of the need for future capital access requirements and changing circumstances.

With the right framework in place, the next question is where should you invest your money to achieve the return you need in the risk parameters you are comfortable with?

Where should I invest my money?

Globally listed company shares, government and corporate debt, fixed term deposits, residential and commercial property, currency, private equity, precious metals, energy, collectibles – the investment world is full of opportunities. Each investment will have its own risk / reward trade off – the greater the risk, the higher the potential reward, so you need to balance the return you need against the risk you are willing to take.

Most investors are aware of the benefits of diversifying to provide smooth returns and spread the risk to capital, but successfully achieving this for your own portfolio requires market knowledge and many investors prefer to delegate this to an experienced professional.

An Investment Manager has the required understanding to construct a portfolio to meet your specific needs, blending together asset classes with different risk / reward profiles, with the appropriate spread across sectors and industries so that the overall risk exposure falls within your appetite for risk, reflecting your tolerance to fluctuations in value over the intended investment period and capacity to absorb capital loss.

Throughout the investment term, the Investment Manager will carry out regular reviews to ensure the asset allocation remains within the risk parameters you have agreed, and the portfolio has the potential to meet the target returns.

Wealth management

Both financial planning and investment management are important cogs in achieving your financial objectives. A financial planner will give your finances direction on achieving your life’s goals, whereas an investment manager will focus on the performance and risk exposure of your investments.

If investment management is done in isolation, you may be taking higher risk than necessary due to inefficient tax planning. Similarly, financial planning should factor in your investment preferences to ensure any recommended investment wrappers are compatible with these.

When these the two areas of expertise work alongside each other to provide you a joined-up service, with the preferred investment strategy complementing financial planning, this is Wealth Management.

Our chartered Wealth Planners can help you take control of your finances. Speak to a member of our team.