As you continue to amass wealth and think more seriously about retirement, you may come across discussions around asset management versus investment management. These two aspects of financial advice are interrelated but are actually two separate practices.
By understanding the difference between asset and investment management, you’ll be able to ask your financial advisor the right questions to achieve your near-term and long-term financial goals.
Asset management, which involves buying and selling financial instruments, such as stocks and bonds, is just one service included in an investment management strategy. For many people, this aspect of wealth management is often the first component that comes to mind when thinking of financial management services.
Large asset managers or broker-dealers tend to offer a narrow investment service that may only provide in-house investment options that may be suitable but not necessary the best option for you. Comparatively, investment management firms that provide advisory services (or Registered Investment Advisors, RIAs) have a legal responsibility to place their client’s financial interests first. Asset managers generally favor large institutional investors and organizations such as trust funds or charities.
Asset management may include an investment strategy utilizing financial instruments such as:
Not all of these investments may be right for your specific situation but are generally offered when you get professional help for your asset management.
So, what is investment management and why is it important? Investment management is the holistic approach to meeting your financial goals when part of a broader wealth management service offering. While asset management is a very important part of this process, investment management embodies all aspects of your financial investments and strategies.
Every individual should have their own customized financial plan. Here are the primary services and strategies that your financial advisor can help you with as part of your investment management.
As we mentioned, asset management is the actual buying and selling of your investments. This is extremely important and should be a main component of your investment management plan. However, instead of focusing on a target retirement date, you should expect to have much deeper conversations with your financial planning team about your financial assets. They will be able to give you financial advice on your overall financial plan for the future.
For instance, you may want to know how much you can spend during retirement based on what you’ve already invested. You can also talk about your goals for retirement and what you’d like to be able to do. From there, you can make adjustments to your current budget to make sure you’re saving enough to meet those goals.
Saving and investing your money is a crucial part of investment management. But in order to best put those funds to work, you also need a proactive plan to minimize your taxes. In coordination with your tax professional, your D&Y financial planning team can develop a number of strategies to make sure you’re taking full advantage of relevant tax savings opportunities. Tax minimization tactics could include
Working with your team of financial professionals is more important than ever as tax laws and guidelines continue to change. Additionally, your financial advisor and tax professional have collective experience in a diverse range of situations. It’s extremely beneficial to lean into these resources for wealth management as you get older and your wealth becomes more complex. If you are curious about the difference between a wealth manager vs financial advisor, check out our blog!
Your personal investment plan should work to maximize your returns for your level of risk. This shouldn’t be a one-time planning session. Instead, you should regularly work with your financial advisor to revisit your strategy and make changes based on the changes in your life and in the broader markets.
Your plan should also include strategies to help weather the good times and the bad. Even as markets fluctuate, your financial planning team can help make sure you’re making smart decisions that serve you well now and in the future.
Charitable giving involves a number of potential investment decisions that allow you to give to philanthropic causes you care about while also minimizing your tax burden. Depending on your goals, you could implement simple strategies like cash donations, or more complex ones such as a donor advised fund or private family foundation.
Your strategies may change based on numerous factors in your life. For example, you may increase your giving during a year in which you saw a significant jump in taxable income. Creating a holistic plan that’s regularly reviewed ensures you are on the path towards your personal and financial goals.
Speaking of goals, this is an important part of the investment management process! It’s not just about aiming for a target dollar amount by the time you reach a certain age (although that’s certainly important). It’s also about discovering what’s most important to you for your life today and in the future.
Once you and your financial advisor have an idea of those big picture goals, together you’ll craft a step-by-step plan towards them. In addition to proactively planning for the future, your advisor also helps you react to and navigate life’s surprises, whether positive or negative.
Investment management has distinct advantages throughout multiple stages of life, from your accumulation phase through your distribution phase. As your wealth grows, it’s important to steward it well and make sure you’re putting that money to work for you.
Here are two primary benefits you’ll receive from investment management services:
As you become more successful in your career or business, you likely discover that time is one of your most precious commodities. That’s one of the biggest reasons why our clients opt for investment management services — it takes time and experience to manage a portfolio and stay on top of other financial check-ups.
There’s a lot of coordination that comes along with investment management. Plus, you must constantly stay up to date on changes in the financial landscape, which simply isn’t realistic for a busy professional. From rebalancing your portfolio to staying on top of tax law changes and economic relief bills, your financial advisor makes sure every important detail is taken care of in a timely manner.
Investment management also lets you rely on a team of experienced professionals to avoid making emotional decisions about your wealth. This is especially important during times of economic and political turbulence. Your financial advisor helps you navigate these unprecedented times both financially and rationally.
With a team of professionals behind you, they’ll provide you with historical insights and data-driven recommendations so that you don’t make short-term decisions that can hurt your bottom line in the long run. It can be hard to exercise patience with your investments, especially when tumultuous times add so much uncertainty to both your personal life and the entire world. Mitigate your fear and anxiety when you have an entire financial planning team working on your investment management.
Asset management is one resource in your toolbox of investment management. When developing your financial planning team, look for an advisor who takes a holistic approach to your finances and life.
Ready to gain time and peace of mind with an expert team behind you? Contact Dowling & Yahnke Wealth Advisors today.