Investment Management vs. Wealth Management: What’s the Difference?

It can be confusing to hear various financial planning terms and know what best suits your needs. They might sound the same, but investment, asset, and wealth management are quite different.  

Knowing the difference can help you align your financial goals with what is available when choosing an advisor. 

In simple terms: 

• Investment management or asset management focuses on managing a client’s investments and building an appropriate investment strategy. This can include money invested in the stock market as well as other assets like real estate. 
• Wealth management takes a holistic approach, integrating investments with tax planning, estate strategies, risk management, and other aspects of your financial life. 

If you’re at the point you’re looking to tap a professional to help, make sure you are weighing the differences between managers based on your comfort level with managing your estate and other financial needs. It’s more nuanced than simply asking “do I need a financial advisor?” 

Understanding these differences helps you choose the right financial advisor or wealth management firm. 

What is Investment Management / Asset Management? 

Investment management is primary focused on managing an individual’s or institution’s portfolio. Beyond buying and selling investment products like mutual funds or ETFs, it includes: 

• Establishing investment goals based on your financial situation 

• Determining risk tolerance and volatility preferences 

• Developing short- and long-term investment strategies 

• Rebalancing to maintain diversification and appropriate exposure to different asset classes 

For example, your investment advisor will consider market trends and your goals to build a portfolio that aligns with your timeline and comfort with volatility. 

Asset management is often used interchangeably with investment management but can also refer to managing large pools of assets for high-net-worth individuals, pensions, institutions, or corporations. 

If you’re comparing investment or asset management vs. wealth management, know that while investment management focuses on growing your financial assets, wealth management incorporates investment management within a broader financial strategy that addresses your financial health and long-term goals. 

Beyond the service-level differences, it’s also important to understand that many investment managers carry a different fee structure that could put your best interests behind what’s most lucrative for their firm, more below.  

How are Investment Managers Compensated? 

Compensation models include: 

• Commissions on products sold 

• Fees based on assets under management (AUM) 

It is crucial to confirm whether your investment manager operates under a fiduciary standard to reduce conflicts of interest and ensure they act in your best interest when providing investment advice.  

Investment management can be more likely to work on some form of commissioned basis, possibly following a suitability standard as opposed to a full fiduciary standard.  

What is Wealth Management? 

Wealth management services integrate investment management, asset management, tax planning, and overall wealth planning to address every aspect of your financial life. A wealth management firm or financial advisor offering holistic planning can assist with: 

• Retirement planning and income strategies 

• Tax minimization across income and capital gains 

• Risk management and insurance analysis 

• Alternative investments for diversification 

• Estate planning and charitable giving 

• Business succession planning for entrepreneurs 

Wealth managers build fully customized plans for high-net-worth individuals to align resources with life goals and proactively adjust as market trends and personal circumstances change. 

How are Wealth Managers Compensated? 

They are typically compensated via: 

• Flat fees or tiered fees based on assets under management 

Because of their comprehensive approach, wealth managers often coordinate with your other professional advisors such as CPAs and attorneys to ensure your financial health is fully supported. 

Although the wealth management structure is more likely to be fully independent and working in your best interest, be wary of those who are dually registered and could be influenced to make recommendations that also benefit their bottom line.  

Process Differences Between Investment Management and Wealth Management 

Here is a simplified breakdown: 

Examples of Investment vs. Wealth Management 

Example: Investment Management 

John and Mary want to invest for retirement. Their financial advisor or investment manager: 

• Reviews their risk tolerance and financial situation 

• Recommends diversified mutual funds, ETFs, and other investment products 

• Meets annually to review performance and discuss market trends 

Example: Wealth Management 

Joan is nearing retirement. Her wealth management firm: 

• Reviews retirement income needs and tax planning strategies 

• Adjusts investment strategy based on market conditions and volatility 

• Updates estate documents and insurance for risk management 

• Discusses philanthropic goals and alternative investments to support her legacy 

Which Management Approach is Right for You? 

• Choose investment management if you primarily need guidance on your investment portfolio and feel comfortable managing tax, estate, and insurance planning on your own. 

• Choose wealth management if you prefer a comprehensive approach to reduce stress and integrate all aspects of your financial situation and personal finance. 

Book a Strategy Session 

At Plancorp, our wealth management services help you simplify complexity and live life with confidence. Book a strategy session to explore how we can support your goals with holistic financial advice.