Wealth Management vs Financial Planning

Wealth Management vs Financial Planning

What is Wealth Management?

Wealth management is a financial consulting service that provides investment advice with other financial services to meet the needs of wealthy clients. The advisor gathers the information about the customer’s wants and particular scenarios through a consultative process and then tailors a personalised strategy that includes a variety of financial products and services.

A growing number of Indians are becoming wealthy, and wealth management is becoming more popular in India. The economic expansion and subsequent increase in household income levels are acting as a driving force in propelling India forward.

The vast sums of money that these wealthy people possess must be carefully managed, which is why wealth management in India is quickly becoming one of the most in-demand services. Wealth management is the provision of investment guidance or assistance in the management of a person’s finances. These services are provided to customers with two primary objectives in mind: growth and the protection of their existing investment.

What is Financial Planning?

Finances are essential for living and enjoying a fulfilling life. Each person works and earns according to their ability. Maintaining a balance between expenses and savings allows one to plan for the future.

Financial planning is an absolute necessity. The Indian economy is expanding rapidly. To match additional costs, spending, and prices, accurate financial planning is required to achieve life objectives and goals.

Financial planning is the process of forecasting the amount of capital needed and determining who will compete for it. It is the process of developing economic plans for an enterprise’s procurement, financing, and administration of funds.

How do these Work?

Wealth management is concerned with financial planning and providing higher returns on investments. This is how wealth management works because the doctrine of wealth management is the long-term preservation of funds:

1. The first step is for your wealth manager to learn about your financial objectives, time horizon, and risk tolerance.

2. The second step is to devise a strategy that is appropriate for you. This entails recommending the best strategies, products, and investments for you. The wealth manager also considers your cash flow concerns, tax obligations, and current and previous investments.

3. The third step is to put the plan into action. The funds are invested in financial products of your choice, and your investment portfolio is put into action.

4. The final step is to periodically evaluate and modify your plan based on your changing needs.

A financial plan is essential because it allows you to make the most of your investments, ensures that you meet your long-term goals, and gives you the confidence to weather any difficulties that may arise.

1. Set financial objectives.

Your financial priorities guide an excellent investment plan. When you approach your personal finance from the viewpoint of what your money can do for you — whether that’s purchasing a home or assisting you in retiring early — it will feel more purposeful.

2. Keep track of your money.

Determine your monthly cash flow — what comes in and what goes out. An accurate picture is essential for developing a financial plan and can reveal opportunities to direct more money toward savings or debt repayment. Knowing where your money goes can help you make short-term, medium-term, and long-term plans.

3. Make an emergency plan

Putting money aside for emergency expenses is the foundation of any financial plan. You can begin with a small amount that will cover minor emergencies and repairs, preventing an unexpected bill from piling up credit card debt. Your next goal could be to save the equivalent of one month’s basic living expenses, and so on.

4. Invest to increase your savings

Investing appears to be something for wealthy people or those who are established in their careers and families. It isn’t.

Investing can be as simple as depositing funds into a liquid fund by simply opening a brokerage account. A variety of tools are used in financial plans to make investments for retirement, a home, or a college.


1. Applicability

Both financial planning and wealth management practices are best suited to different types of people. Wealth management is ideal for sophisticated investors who have an adequate amount of money. 

Wealth management should ideally be used to multiply existing wealth while also preserving it. Financial planning, on the other hand, is intended for everyone. HNIs and non-HNIs are both included. The strategy of financial planning is to save and improve individuals’ hard-earned money to align it with their investment goals.

2. Purposes

The scope of financial planning and wealth management activities differs. Financial planning is the process of handling an individual’s income and expenditures and maximising their use to accomplish investment targets. There is almost no room in financial planning for managing vast wealth in an individual’s savings account and other assets owned. 

Wealth management, on the other hand, is concerned with the management of an individual’s established and accumulated wealth, which is held in various types of assets, by investing it in various types of growth-oriented financial products.

3. Scope of activities

A financial planner’s day-to-day operations in the aspect of economic planning include planning an individual’s day-to-day spending as well as other activities such as an individual’s monthly salary, expenditure, tax deductions, tax preparation, and savings. The range of financial planning does not consider the amount of wealth or the extent of assets one possesses. This is not the case with wealth management, where wealth planning is only focused on the amount of wealth one has and invests and reinvests it to obtain high-yielding returns while also growing.

4. Involvement level

In the case of financial planning, the operation scheme does not require active participation from the individual. The steps that the individual must take are designed by the financial adviser. Individuals do not have much room to grow. However, wealth management typically entails the customer actively collaborating with the wealth manager to better optimise investment decisions for future wealth accumulation and preservation.

5. Consultants’ compensation

When it comes to the compensation of financial advisers and wealth managers, they are the opposite. A financial adviser charges a pittance of Rs. 5000 to 10,000 per individual, with the fee increasing following the extent of the task entrusted to the planner. 

In the case of wealth management, however, the manager charges a percentage of the customer’s portfolio. The percentage of remuneration ranges between 1% and 2% of the customer’s portfolio and is usually paid on an annual basis.