Any class of income group we may belong too, but we do financial planning. Financial planning is done by anyone and everyone in possession of even little cash doesn’t matter whether you are a student or stock market broker. Even if we give Rs 100 note to a 10 year kid, to spend, He will also plan how to spend the cash, to get the maximum value for the same.
But what is wealth management? It is basically for the individual in possession of huge wealth, so they need to plan strategy to grow, preserve and in the same time enjoy the wealth as well.
So, here we get to the most basic difference between financial planning and wealth management, former being for each and everyone, and wealth management is certainly for the individuals who are in possession of wealth.
Financial planning is paving a path using various strategies, keeping personal long and short term financial goals in mind, which may ultimately lead to accumulation of wealth. Goals could be anything; it could be to finance your kid’s higher education or built a house and many more. Goals are very subjective, they do not remain same throughout. It changes with age and income level as well.
And to reach our financial goal, we do something beyond our regular jobs. We put some of our money aside as saving or we put our money into fixed deposits. The other things to do with our money are to invest into some financial asset or financial vehicle, to make our money grow over time thus helping us reach our financial goals.
A poor financial management and lack of knowledge, may lead to loosing of whatever one has. A comprehensive financial planning will involve Cash flow & Debt management, Risk Management, Investment Planning, and Tax Planning Retirement & Estate Planning too.
Shifting the focus to wealth management, from financial planning..
Wealth as a basic definition mean abundance of valuable in possession, valuable could be anything, be it cash, gold, property etc..A wealth manager looks for opportunity, primarily to preserve the wealth, and grow the wealth. This involves managing a basket filled with various asset classes like, equities, bonds, real estate, gold , foreign currency and many more things, which are valuable in nature.
To understand the difference, Financial planning is the first step towards achievement of financial goals, whereas wealth management involves preservation and growth of already possessed assets classes.
Financial planner looks and critically analysis risk factor of individual in question, keeping risk tolerance and risk taking capacity in mind whereas wealth manager critically looks at the risk associated with various assets classes in possession.
Financial planner create strategies to ultimately meet your financial goals, whereas wealth manager creates strategy keeping the characteristics of various asset classes in mind, thus making a strategy that help first preserve the wealth and then grow.
Thus there is a thin line of difference between financial planning and wealth management, which makes them different from each other.