Asset management and financial planning tend to be used interchangeably. Just like financial advisor, financial planner, and wealth manager are all used the same. There is a true difference between asset management and financial planning. Through this read, you will notice key differences, make sure to reflect on the financial professional you work with to see if he or she accomplishes parts, if not all of these action items.
Asset management, as described by Investopedia, is the direction of all or part of a client’s portfolio by a financial professional. A firm or individual will ask goals and desires to align a plan to invest your assets that will allow you to achieve your aspirations. With this type of relationship, the upkeep is very minimal and has more a transactional relationship. The responsibility of the financial professional is to grow the client’s portfolio through money market funds, FDIC funds, annuities, portfolio of stocks, etc. If you have a relationship with a current financial professional, please reflect on whether the professional is fee or commission-based. For more information about fee-based – please click here. Overall, asset management is only a piece of financial planning.
Financial planning is all-encompassing. Financial planning helps you understand:
- Net worth
- Cash flow
- Taxes
- Investments
- Retirement plans
Each section has its own unique situation, but overall, they all impact you and your future. Here at The Tranel Financial Group, we use a data visualization tool called Asset-Map to show a holistic picture of what the client obtains. From there, we talk about time horizon, and your income needs stake. For more information about time horizon – download our free book Sunny Side Up. This book shows strategies for growth and income in retirement. Through a series of questions, we develop a strong understanding of your needs stake of cash flow.
Finally, we take you through a tool call eMoney which will help us to calculate the percent funded to your goals. This tool is strong to the degree that we can actually “play” with the numbers to see how aggressive or lenient you can be on saving for retirement. Investments are always part of financial planning as this is where your money can work for you. We are independent, meaning we can utilize any portfolio to help you achieve your goals. We can do anything from recession-resistant models to death benefits and retirement accounts. For financial planning, financial professionals and clients tend to meet more often as situations arise, which they always do. Financial plans are meant to be adaptable as your living situation will change throughout the years. It’s a living plan that develops and updates.
Does your financial advisor accomplish any of the above? Our encouragement to you is to always be an advocate for yourself to make sure that you are enjoying life to the fullest and that you are not in retirement and always worrying about money.