When planning for your financial future, there are a number of routes you and your loved ones can take. Two of those routes are portfolio and wealth management. At first glance, they may seem very similar, but the two are significantly different from each other.

Portfolio management, also referred to as asset management, serves as a focused investment strategy, where investors seek to see the best possible returns while balancing risk. Wealth management, on the other hand, is a much more holistic approach, often involving everything from investments to retirement planning. 

So, what differentiates portfolio vs. wealth management? And which option is right for you? In this blog, we’ll break it all down.

Portfolio vs. Wealth Management: What is Portfolio Management?

Let’s start the portfolio vs. wealth management discussion by first breaking down the main characteristics of each option. Both portfolio and wealth management present clients with a unique financial plan. In portfolio management, it’s important to consider risk versus reward. This is a focused, targeted approach in which investors invest in assets to try and secure the highest possible returns while managing their overall portfolio risk.

There are four different types of portfolio management. Active, passive, discretionary, and non-discretionary. In active portfolio management, the goal is to achieve higher returns than the market benchmark. In passive portfolio management, the goal is to match an index or benchmark’s performance. Discretionary and non-discretionary portfolio management deal with a portfolio manager’s ability to make decisions about an investor’s holding with or without their insights. Ultimately, the goal is the same: grow an investor’s portfolio through assets such as stocks.

The Role of a Portfolio Manager

A portfolio manager will typically be tasked with making investment decisions, managing assets, and ensuring that investments align with the established objectives and strategy. They analyze market trends and investment opportunities to make informed decisions that will contribute to the financial growth of the client.

In a discretionary arrangement, the manager can make decisions for their client without the need for ongoing authorization. In a non-discretionary arrangement, the client will reserve the right to accept or decline any potential strategy that their portfolio manager suggests.

Wealth Management: The Holistic Approach

When comparing wealth management vs. portfolio management, wealth management is much more comprehensive. This financial strategy encompasses a much wider range of services to better tailor the right approach to a client’s specific needs or long-term goals. It goes beyond investment strategies to grow and safeguard a client’s wealth over time. For example, a portfolio manager may reinvest funds from one stock to another while a wealth manager may complete the same step while also setting aside funds for a client’s retirement fund.

There are five core elements of a well-run wealth management strategy. The first is financial planning to reach both short and long-term goals. Asset allocation is the second, in which clients are given tailored strategies based on their goals and willingness to take risks. The third is asset management. Finally, four and five are estate and tax planning. Together, these five core elements make up a true holistic wealth plan for clients.

The Role of a Wealth Manager

To put it simply, a wealth manager wears a lot of hats. They assess a client’s entire financial situation and devise a comprehensive strategy to meet the client’s goals. Their role involves continuous monitoring and adjustment of the financial plan to ensure it remains aligned with the client’s objectives, changing life circumstances, and market conditions. When the unexpected happens, a wealth manager must be ready to spring into action to help their clients navigate any newfound financial circumstances.

Is Portfolio or Wealth Management Right for Me?

So, now that we’ve established what makes each strategy different, you might be wondering which option could be best for you. When analyzing portfolio vs. wealth management, it’s important to first ask yourself what your goal is. Are you looking for a short-term or a long-term financial plan? If you said the former, portfolio management may be the way to go. If you answered the latter, wealth management may be the better fit for you and your family.

It’s also important to consider how much risk you’re willing to take on as part of your financial and investment plans. Consider your goals and how you want to achieve them. We should note that neither portfolio nor wealth management strategies can ever guarantee returns. Always consult with a financial expert before rushing into any decision.

Managing Your Wealth with BIP 

If portfolio and wealth management are on your radar, our team is ready to help you plan for the future. At BIP Wealth, we’re engineered to perform for you. Think of us as having your own personal CFO. We work closely with each client to create personalized plans based on empirical research with savvy integrations of alternative investments to help clients gain access to investment opportunities historically saved for just the upper class. Through family-style wealth management, including comprehensive estate, tax, and investment planning, our experienced team aims to foster a sense of belonging for each client. To learn more about our services, visit our financial planning page. You can also contact us to get in touch with one of our wealth managers.

FAQs

What are the four types of portfolio management?

The four types of portfolio management are active, passive, discretionary, and non-discretionary.

What is the difference between portfolio and wealth management?

Portfolio vs. wealth management comes down to the level of services. Portfolio management focuses on assets and investments while wealth management focuses on long-term holistic wealth plans.

What is the difference between a financial advisor and a portfolio manager?

A financial advisor generally provides a broad range of financial planning and investment services to clients, while a portfolio manager tends to focus specifically on investments.

This communication contains general investing information that is not suitable for everyone and is subject to change without notice. Past performance is no guarantee of future results and there is no guarantee that any views and opinions expressed will come to pass. The information contained herein should not be construed as personalized investment advice, tax advice, or financial planning advice, and should not be considered a solicitation to buy or sell any security. Investing in the stock market and the bond market involves gains and losses and may not be suitable for all investors. Indices are not available for direct investment.