Difference between wealth management and financial planning

Difference between wealth management and financial planning

What is the difference between wealth management and financial planning?

There is a fine line between wealth management and financial planning. This line is often confused by the financial advisor and in turn, they confuse clients. Often both are thought to be the same for the wealthier bunch of people, as both processes fall under financial advising. However, financial planning and wealth management are designed to suit the requirement of every section of people belonging to the different financial background. In this article, you can find the important points of difference between these two practices.

What is Financial Planning?

Financial planning is required in everyone’s life to synchronize their financial goals with their finances. It is the phenomenon which includes various financial processes throughout your financial life to achieve your financial goals.

Financial planning and wealth go hand in hand but the former is not dependent on the level of the later. You can do financial planning irrespective of the amount of wealth you have. It is basically a set of few quantitative measures that one has to abide by to reach his or her financial aspirations. Financial goals include various financial objectives in your life such as investing in real estate, child’s education, marriage, and others. It is also helpful in making retirement plans.

Is financial planning only for the rich?

Is financial planning for everyone?

Financial planning is for everyone who wants a financially secure and stable life. It is for building wealth and thus it is not only for the wealthier section of people. With a successful financial plan, one can achieve his goals in life.

Financial planning is mostly done by the Certified Financial Planner(CFP). They have the knowledge and required expertise to plan your finances well so that you can meet all your financial needs and fulfill your desires. Often people think hiring these professionals are expensive and thus financial planning is associated with the rich people. However, in reality, financial planning is not expensive and worth the money you pay to this professional as it helps you build a life which is financially sound.

Financial planning is a part of financial services that include:

  • Debt Management and Cash Flow Management that helps in planning your income and expenses
  • Managing financial Risk by using financial products like life insurance you can secure your and your family’s future.
  • Estate and Retirement Planning by proper financial planning you can accumulate enough money for your retirement and build your estate by estate planning
  • Tax Planning – It is crucial to financial planning for saving your hard earned money
  • Financial planning is not only about saving but the need for financial planning is there when it comes to an investment as well.

What is Wealth Management?

Wealth management meaning if simply put is nothing but preserving the wealth one already have and growing it over the long term. It is for the high net worth individuals who can hire wealth management services.

Private wealth management thus is a process of securing the wealth of a rich businessman or HNI and growing and accumulating more wealth using the existing wealth. The wealth management products include various financial products ranging from mutual funds to equities and bonds. It is basically a process of asset allocation to improve your financial situation.

Need for financial planning and wealth management in every phase of life

In every phase of life, we require finance to support our needs and necessities. If we segregate life in three different phases namely Education Phase, Accumulation, and Retirement phase, we can evaluate the importance of wealth management and financial planning in each of these phases.

Education Phase:

In the Education Phase, we do not have wealth which is required to be managed. However, financial planning is required to manage our expenses, income if you have taken an educational loan, planning is required to repay it smoothly.

Accumulation Phase:

In the next phase of life, we accumulate wealth and this is when financial planning is crucial to make every penny count. Wealth management is not required at this phase as well, however, if you inherit some wealth that you want to invest and grow wealth management can help in that.

Retirement Phase:

Finally, in the retirement phase of life, you want to preserve the wealth you have accumulated till now and want to see it grow to provide your family with a financially secure and affluent life. Here Wealth management plays the key role.

One thing that we can understand from the above discussion is that the importance of financial planning is there in every phase of life.

What is the difference between wealth management and financial planning?

Five Crucial points of difference

  1. Wealth management is mainly for the people who are having a sufficient amount of wealth or to be specific for the HNIs. It is opted for making the existing wealth grow multiple times and also for the preservation of the wealth. On the other hand, financial planning and analysis are for all. It is for all income groups including (lower income groups, HNI’s, etc. The objectives of financial planning are to save the hard earned money and achieve the financial goals of an individual.
  2. The financial planning process involves managing income and expenses. It does not require accumulated wealth which is existing in your bank account or in other assets. Wealth management differs here from a financial plan and requires accumulated and existing wealth which can be invested in various financial instruments for growth.
  3. Personal financial planning revolves around your day to day expenses, monthly income, savings, tax savings, and tax planning. The factors affecting financial planning do not include the amount of wealth you already have in hand or the assets you have. However, in wealth management, the basis of the process is the amount of wealth you have.
  4. Financial planning does not require the constant participation of the individual. The financial planner can plan the ways and the individual needs to follow the same. In wealth management, the client needs to be actively participating with the wealth manager to optimize his or her wealth accumulation and preservation process.
  5. The fees for financial planners and the wealth managers are completely poles apart. In India, the financial planner’s charges within the range of Rs. 5000 for managing your portfolio. However, if it includes complexities then accordingly the price can go up. On the other hand, the wealth managers charge as per a percentage of the portfolio they are handling. Most often they charge 1% to 2% of the portfolio they manage and it is on a yearly basis.


While the need for financial planning is consistent throughout a life span, the need for wealth management is restricted to the phase when one has accumulated enough wealth or has inherited wealth. Though both are quite different in their approach they are often confused as both are part of financial advisory services.

NISM V-A Mutual Fund Distributors – Question Bank

Mutualf fund distributors question bank