Boring but necessary clarifications

This week I was chatting to a friend who is trying to figure out where to invest his savings.

I walked him through trying to find a good private banker or wealth manager who could help him out with asset  management and financial planning by finding the right portfolio managers and investment managers to allocate his assets.

If you understood that last sentence, you can stop reading now as this post isn't for you. If you went "huh", all those terms sound the same to me, please keep reading.

I tried to find a good redux of definitions for the various types of money "management" but couldn't find one. I think I have picked up the nuances in terminology by virtue of working in the financial markets for many years and I suspect that’s how most of us figure this out. Wikipedia and Investopedia have the longer technical definitions of these terms, but I’m going to try to break the terms into basic uncomplicated plain English....

Wealth management

An umbrella phrase for managing your wealth. This is the broadest definition of investment planning for people.

A wealth manager should help you decide your financial goals and make suggestions about what kind of financial products...equities, bonds etc. would be appropriate. They help you decide on which portfolio managers and investment managers you should entrust with this task.

Private banking

Wealth management (see above) for the very wealthy.

Asset management

A catch all phrase for formalised investing of all types. So if you work in asset management you could be in a real estate, stocks, bonds, equities etc.

Investment Management

Picking specific investments. So an investment manager might specialise in technology stocks or the Indian market. You or your wealth manager might pick one or more investment management firms to manage your money once you’ve planned what assets are right for you.

Portfolio management

This is the process of deciding which investment mix might work for certain goals or what industries and geographies one needs to be invested in. A portfolio manager at a large mutual fund will be the decision maker on what types of investments to make while they will have investment analysts handling on specific investments at a granular level.

I hope this is helpful to those of you who don’t work in finance and investing!!

Best,

Mallika