If you are an expat in living in Asia, you have probably heard financial salesmen using these 3 phrases more or less interchangeably. But are they really the same thing?
Financial Planning is the process of matching your assets and income to your long term goals. This often requires Professional help, as some difficult choices and complex calculations may be involved. An integrated financial plan encompasses savings, investing, offshore banking — and most of all, goal setting. If your financial advisor isn’t spending a lot of time discussing your major long term goals then something is wrong. A good financial plan will act as a roadmap covering the major expenses of your life, including tuition, housing and retirement.
Portfolio management is an older, more established discipline where professional managers construct and balance a collection of assets. If your assets and income are modest, then you can usually rely on a structured savings plan to cover most of your portfolio management needs. As you build up your household’s asset base, however, you will need to devote more time and attention to managing your portfolio. Professional portfolio managers speak in terms of risk-return profiles, diversification, asset allocation and investment horizons. Portfolio management can be a complex process, and if your net worth is approach the 7 figure range it is probably a good idea to get professional help. Lots of people talk about it — few do it. As a general rule, you don’t want your portfolio manager involved in the sales process (since it could lead to MAJOR conflicts of interest).
Wealth management is a product or collection of banking & financial services dreamed up by marketers. It encompasses both financial planning and portfolio management. Back in the US or Europe, ‘wealth management’ and private banking are used interchangeably to charge wealthy people more money for more and better services. For expat managers in Asia, however, wealth management is less of a luxury and more of a necessity. Unless you plan on devoting a lot of time to banking, taxes and insurance issues, you may want to avail yourself of one of the many fine wealth management and private banking companies in Asia. Choose carefully, however, and make sure you choose an advisor who can actually make good on their promises.