Financial Planning vs. Asset Management: What’s the Difference?

You may have heard the terms “financial planning” or “asset management” before. These terms can sometimes feel confusing because, intuitively, they sound like they would overlap. That is, financial planning would, in theory, account for the management and optimization of your assets. However, within the financial world, these terms have distinct meanings and serve very different purposes. Here’s what you need to know about this part of investment advising.

What Is Financial Planning?

To start, let’s first look at what, precisely, financial planning is. In short, it involves discussing your financial goals and creating strategies to achieve them. Financial planning focuses on what you want to achieve and how your money can help you get there.

For example, when you’re working with a financial planner, you might be asking these types of questions:

How much should I save for retirement?
How much will I need for my kid’s college?
When should I file for Social Security?
What insurance products make sense for me?

These are questions that almost every adult has at some point in their lives, and the job of financial planners is to help you get clarity on these goals. For example, when you ask, “how much should I save for retirement?” your financial planner might sit down, calculate how much you’ll need, and give you a percentage of your income that you should be saving (it’s usually around 15% at a minimum).

Therefore, financial planning involves the future, creating concrete steps to help you achieve your goals!

What Is Asset Management?

Asset management is related but not the same as financial planning. While financial planning involves creating goals and thinking about the future, asset management involves the day-to-day tasks of ensuring your money’s optimal investment.

Asset managers will build your portfolio, ensuring proper diversification and asset allocation to help you achieve your financial goals. As you get older and closer to retirement, for example, you’ll want your portfolio to shift more conservative. When you’re younger and just starting, you’ll want your portfolio more aggressive. Portfolio balancing is only one aspect of asset management, but it gives you an example of what this term involves.

The Two Disciplines Go Hand-in-Hand

As you might imagine, the two disciplines often work together. Financial planners create a roadmap to achieve goals and make your dreams come true when it comes to your money. Asset managers work to ensure that your money is where it needs to be. It’s one thing to put together a plan, but it’s another to execute on it and ensure your money is working the hardest towards your vision.

For this reason, asset managers and financial planners often work together. Sometimes, people even consult with a financial planner and do their asset management themselves. More rarely, people will plan their finances and ask an asset manager to oversee the strategy.

It’s worth noting that both financial planners and asset managers are registered investment advisors. It’s up to each firm to determine what they want to offer (financial planning, asset management, or both). Therefore, when you speak with a financial firm, it’s always worth enquiring what services they offer.

Why Would I Want Professional Financial Planning or Asset Management?

Many people turn to professionals for one or both of these aspects of money management. While there are many reasons why people might want to have professional insights into their money, the biggest, arguably, is that the financial landscape is challenging. How much you’ll need for retirement, how to pay for your kid’s college, what’s the difference with the 529 offerings – these are all hard questions to answer.

When it comes to asset management, most people put their money with professionals for peace of mind and to save time. You probably don’t want to have to keep following up on your accounts. What if market volatility sends one of your stocks in a downward spiral? Will you be able to catch it in time? How will you rebalance your portfolio?

Having a professional monitor your accounts and create a roadmap for your financial future ensures that your money is always working the hardest for you and your family.

We Have Extensive Financial Planning and Asset Management Experience

At M&A Wealth, we have extensive financial planning and asset management expertise. No matter what your goals are – whether you want to save for your child’s college expenses or you want to create a hedged portfolio and retire comfortably – we can create a roadmap to help you achieve your dreams.

If you would like to speak with a qualified financial advisor, please give us a call for a free consultation, or contact us online. We’d love to hear more about your aspirations for the future!