With an expanding array of financial services, it is important for every investor to understand the difference between financial planning and wealth management. Although these terms are used interchangeably, both serve a unique and necessary function.
This post will list the key differences between financial planning and wealth management, which will help you make more informed financial decisions and utilise your resources optimally.
Financial Planning is creating a roadmap to achieve financial objectives by making informed investments in financial products. Financial planning & management involves studying your financial situation, setting financial goals according to your needs, and developing strategies and plans to accomplish them.
Financial planning includes investing in products such as stocks, ULIP Plans, mutual funds, retirement plans, term insurance plans, etc.
Wealth management goes beyond financial planning. It involves asset management and allocation, investment diversification, retirement planning, taxation, and budgeting.
Wealth management aims to protect and grow your wealth exponentially by investing in financial instruments that suit your risk appetite and goals.
| Key Difference Between Financial Planning and Wealth Management | Financial Planning | Wealth Management |
|---|---|---|
| Frequency | It must be done once or twice a year or when a major life event occurs. A professional examines your goals and needs and suggests appropriate solutions. | It is a continuous process that remains active throughout your investment journey. |
| Function | It helps identify future goals and find ways to achieve them by using financial instruments. | It helps manage your wealth by providing insights on suitable investment products, like mutual funds, life insurance, saving plans, etc., and advicing on how to preserve and multiply your assets. |
| Cost | Lower as compared to wealth management and depends solely on the complexity of the work. | Higher as it offers a comprehensive set of services. |
| Suitability | Financial planning is considered to be suitable for individuals who want to make the most of their hard-earned money and fulfil specific financial goals. | It is best suited for individuals with high-net-worth or substantial assets seeking wealth maximisation. |
| Client Engagement | Tracking goals with periodic consultation and reviews are part of financial planning. However, your participation is limited compared to wealth management. | It requires regular participation as frequent investment decisions must be made in light of changing times and needs. |
| Focus | Financial planning focuses on creating a plan that helps you achieve your goals. | Wealth management prioritises the preservation and growth of your wealth by building investment strategies to accumulate more wealth. |
| Basis | It pays attention to your day-to-day income and expenses to use your financial resources more efficiently. | It considers the concept of wealth maximisation in financial management. |
| Services | Financial planning offers services like managing cash flow, debt, income and spending, tax planning, investment planning and the creation of emergency funds. | The services offered under wealth management include personalised investment advice, estate and tax planning, wealth preservation and wealth maximisation. |
| Financial Requirement | Only requires a commitment to save, invest and manage your money. | You need to have an existing source of wealth. |
| Management Approach | Passive | Active |
| Level of Inclusiveness | Provides basic investment and management services. | Offers comprehensive investment and management services. |
| Need | Financial planning is needed to achieve goals like purchasing a car or house, saving for emergencies, accumulating funds for a child’s education or marriage, building an adequate retirement corpus, etc. | Wealth management is needed for asset protection, succession planning, funding charitable institutions, retirement planning, asset diversification, etc. |
Financial planning and wealth management help you enhance your quality of life while preserving your savings and wealth. However, understanding the difference between the two is essential for making informed decisions about your financial future.
With PNB MetLife, you can enhance your financial well-being and attain more peace of mind. Our life insurance plans, like the Century Plan, help you reach your financial goals without compromising on your dreams. With this plan, you can not only secure your life until the age of 100 years but also leave a legacy for future generations.
Wealth maximisation in financial management is a type of strategy that focuses on increasing the net-worth of an individual in the long-term by making profitable investments.
A financial planner for wealth management will help you create a strategy to protect, manage and grow your wealth. This professional draft an investment plan that will put your savings to work to generate additional income to help you reach your financial goals.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
PNB MetLife India Insurance Company Limited
Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
IRDAI Registration number 117 | CIN U66010KA2001PLC028883
For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.
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