What actually is a wealth management and how is that different than asset management?
The two are often used interchangeably. But there they have distinctions. The asset management business is where we manage money on behalf of individual institutions sovereign wealth funds pension funds. We manage them in mutual funds. We manage them as an ETF and also manage them in single stock single bonds hedge funds private equity.
Wealth management is what we do in asset management plus understanding someone’s entire balance sheet. So for the individuals for whom we manage money, we also help them with their mortgages, with a loan that they might need, and also with their basic credit card. And so wealth management is trying to help someone with their entire life both their assets and their liabilities, about their planning their gifting the legacy that they want to leave for their families and it’s a great insight into people’s entire journey.
So lets about asset management. Asset management is the administration of assets depending on the investor’s goals and willingness to take risks. An asset manager compiles portfolio security papers that promise high returns are usually rather risky. A skilled asset manager thus should create a portfolio that balances out an appropriate level of risk with suitable returns. This task can be compared to what the worker chef does when assembling a multiple-course menu for his guests.
The chef will purchase the necessary ingredients at a food market. The asset manager procures security papers from the capital market, he needs to consider and incorporate his client’s willingness to take risks. The chef on the other hand needs to cater to his guest’s tastes, too little salt is just as detrimental as too much of it. While the chef is able to check his dishes by tasting them, the asset manager has to go to greater lengths to verify his portfolios, possible returns, as well as risks, and refer to the future. Here complex political economical or psychological factors have to be taken into account assessing these is what makes asset management interesting and challenging in the present. Its results and quality may only be experienced in the future through you.