When it comes to money management vs. wealth management, is it correct to think that they are the same thing? Not exactly. Money management is more of an issue-by-issue management style, whereas wealth management considers the bigger picture. In this blog, we discuss key differences between the two.
When it comes to managing money, there are many things that need to be taken into consideration. Here are a few examples:
- Investment time horizon
- Risk/reward objectives
- Strategic asset allocations
- Security selection
The list can be long, and some may prefer to take on the task of money management themselves by making decisions off of pure instinct or self-served research. This can be a daunting task for many, which is when the help of a qualified financial advisor may make sense. However, not every advisor is equal and decision making can vary greatly from one advisor to the next.
There are many different securities and investment products in the investment universe, not to mention the ever-evolving global economy. Whether it’s managing money for an institution (pension fund, financial corporation, insurance company, etc.) or for an individual, the objective is typically to grow the investments over a long period of time. For individuals, managing money can be a bit easier while they are still working and have wages to support everyday expenses.
When discussing wealth management, one is typically trying to preserve and generate income for individuals and families. Wealth management can become as complex as managing money, but with many different elements.
One of the biggest decision making factors is dealing with taxes. This is where a certified financial planner, tax advisor, or a wealth management team can be extremely helpful in helping the client develop a tax-efficient asset location strategy (deciding where to hold certain investments) and retirement distribution plan. Estate planners will also play a key role in protecting personal assets from creditors and unexperienced beneficiaries.
Conclusion: Money Management vs. Wealth Management
Even if you are well-educated and passionate about your own finances, think about your spouse and loved ones. Ask yourself, “Does my spouse/partner/child have the ability or willingness to make sound money management and wealth management decisions on their own?” If not, then consulting with an experienced financial planner/advisor may be a great long-term decision.
At Chatterton & Associates, our team of expert financial advisors specialize in a full suite of financial planning services, including money management vs. wealth management. To request more information about our full suite of financial planning services or to speak with our staff directly, contact Chatterton & Associates today.