When it comes to personal financial management, it has two hands Financial Planning and wealth management. Even if, they are related to money management, however, they differentiate from each other significantly.
According to the notable financial advisor Scott Tominaga, knowing the dissimilarities between wealth management and financial management is vital since that will help individuals find the right professional to plan their finances. Backed by decades of experience in banking, personal financing, stock trading, and wealth management, currently the professional is serving as a specialist in financial planning. Following how they are set apart. Those on the lookout for a financial advisor should ensure to work with a professional who is committed to their services while considering the best interest of their clients at all times. This is why one should make sure to hire a Fiduciary financial advisor.
Defining Financial Planning?
Financial Planning refers to the process of harmonizing personal finances with the life goals of individuals. The procedure includes different financial processes and decisions throughout the lives of individuals to help them achieve their financial goals. Therefore, financial planning allows individuals to consider their life goals and helps in prioritizing, saving as well as investing money in different schemes to accomplish the desired targets on time.
In general, the process includes cash flow management, debt management, risk management, and investment management. For investments, usually, it depends on financial products such as life insurance, fixed income schemes, mutual funds, etc. It helps individuals to plan their future financial goals such as buying a home, education, retirement, etc. while tax planning plays a vital role in financial management to save money backed by tax credits and tax benefits.
Defining Wealth Management
Wealth management refers to the process of preserving and growing wealth of individuals over time. However, this process is specially designed for business professionals, affluent families, and High-Net-Worth Individuals (HNIs) to help them secure wealth, multiply, and become wealthier using their current wealth.
Some of the common processes of wealth management encompass classifying and taking part in profit-making plans, and estate planning, apart from assessment of capital gains, risk, and tax management. The financial products that it focuses on include mutual funds, bonds, equities, property, gold, etc.
How Financial Planning Differs from Wealth Management
The major differences include
Niche
Both strategies are designed for different niches of individuals. Wealth management is ideal for affluent or HNIs and helps in growing their existing wealth multiple times and equally preserving them. Conversely, financial planning is the right choice for common people, including HNIs and emerging or very HNIs says, Scott Tominaga.
Objective
Financial Planning helps in managing income and expenditures while leveraging them to reach one’s life goals. On the contrary, wealth management concentrates on managing the prevailing and hoarded wealth lying in various assets while investing them in assorted financial instruments to multiply.
Scope
The method of financial planning entails managing daily expenses considering one’s monthly income, tax planning, savings, and tax-based savings. Therefore, the scope of it helps create a financial roadmap while taking into account the accumulated wealth to reach the desired financial goals. Conversely, wealth management focuses on accumulated wealth and suggests how to grow the wealth with high-yield returns.
Professional’s Involvement
Financial Planning mostly does not require the active participation of the professional. Before designing the plan, the financial advisor works together with their clients to get inputs like their income, expenses, and financial requirements and goals. According to the professional design a plan involving investment planning, and tax management among other guides, which needs to be followed. On the contrary, wealth management needs active participation with a wealth manager to make the investment decision together for the creation of more wealth and preservation of it.
