Most of us have heard the terms wealth management companies, investment management firms and insurance companies. Yet the concept of managing our financial affairs, from our retirement to our annuities, remains a mystery. In this piece, I want to examine the differences between each of these entities, and find out what separates them from one another.
An investment management firm is an entity that buys, sells or otherwise manages a portfolio of investment instruments. Its goal is to protect their investments from risk. To do this, it will either buy, sell or hold an asset, at a price that protects it from fluctuation. While its goal may be to protect and secure their portfolios, it also may have a mission to generate revenue for the company itself.
An investment management firm, for instance, might be in the business of buying an annuity, a savings account or even a retirement account. As the name implies, the objective of an investment management firm is to maximize the return on investment for a given portfolio of assets. In order to achieve this, the firm will work with investors, banks and other financial institutions, as well as tax preparers and attorneys.
It is difficult to say how many times an investment management firm is asked to manage the accounts of their clients. This is because most of the time, these firms deal with individuals and not corporations.
There are other differences between an investment management firm and an insurance or a retirement planning agency. For example, while retirement accounts and annuities will generally be held by an investment management firm, the goal of an insurance company or an insurance agency is to provide coverage for individuals. The insurance company’s goal is to make a profit from insuring and managing an asset portfolio. If the insurer is successful in doing so, they will then provide the benefits to the individual in the form of an annuity or some other type of insurance.
When people think of wealth management, the most common association that comes to mind is with wealth protection. However, there are many types of wealth management that exist. A great example is debt management. While this may seem like a specialized area of managing wealth, it actually deals more with how we can responsibly handle our money than it does the proper distribution of our wealth.
For example, if we have retirement accounts, we may have a retirement plan that protects our wealth. Although the protection and investment plan might seem to be in place, there may be many issues surrounding the management of our funds. In other words, our advisor may not understand the value of interest rates, inflation and other variables that can impact our retirement funds. This type of risk management is called asset-based management.
Retirement accounts are very important to protecting wealth, but not everything can be handled by retirement accounts. For instance, a good wealth management firm will handle investment portfolios, insurance and other types of investments. Wealth management firms offer the ability to invest in the stock market, bonds and CDs, while retirement accounts focus on pensions, IRAs and annuities.
Life insurance is another area where life insurance firms come into play. Because life insurance plans pay a death benefit upon the death of a policyholder, it is imperative that the insured has a plan in place to cover these benefits. Life insurance companies have come into existence to assist with the administration of these plans. Some of the largest life insurance firms are called life insurance brokers or life insurance companies.
Life insurance is very important and one of the reasons it is so popular is that it does not require a great amount of investment. Most people have at least some amount of life insurance. In fact, many people don’t even realize that they have it until they are already in their golden years. While life insurance is very important to protecting your wealth, it can also help you live longer.
One of the benefits of life insurance is that it is guaranteed renewable. Unlike other types of wealth management, it doesn’t need to be replaced as soon as you die.