
- What
is Financial Planning?
Financial
planning is all about managing your day to day finances to be
self-sufficient in life. You may have a monthly income of say Rupees
20,000. You will have to pay rent to the landlord. You will have to
pay for your kid 's education. Money is required for buying monthly
provisions. You will need to pay your servant. Additionally you need
to apportion a part of your earnings towards recreation or
entertainment. You need to plan your expenses accordingly. Over and
above all these expenses, you need to allocate some money towards
your saving for your future or for your retirement. This is when you
would seek the assistance of a financial planner, who would assist
you in making use of your funds in an optimal manner. Budgeting, cash
flow management, and retirement schemes fall under the gamut of
financial planning.
- What
is Wealth Management?
Wealth
Management is meant for the Higher Net worth individuals or highly
rich businessmen. They appoint wealth managers to help them preserve
their existing wealth and to help them accumulate even more wealth.
Investors take the services of wealth managers to identify core
profit-making opportunities. Hence, in a nutshell, you can conclude
that wealth Management is a process by which you preserve your
existing wealth and try identifying opportunities to accumulate more
wealth. Capital gains assessment, risk management, and estate
planning are activities that fall under the umbrella of Wealth
Management.
Core
differences between the two

Now,
let us go on to discover the core differences between the two:
-
Financial
planning is more opted by the middle class or the lower-middle-class
people, who need financial advice to help them make ends meet while
wealth management is chosen by high net worth or the highly elite
class of the society. These high worth individuals aim at
identifying business opportunities which can either double or triple
their existing wealth.
-
Financial
Managers are always in demand and job opportunities for financial
managers are abundant. For the wealth managers, there are fewer
opportunities while the profession is a much highly paying one.
-
One
does not need existing source of wealth to undertake financial
planning as it deals with day to day aspects of managing your
finances. Wealth Management needs existing wealth as a platform or a
base upon which further capital or investment funds are accumulated.
-
Financial
planning deals with day to day aspects of planning your cash, while
wealth management deals with preservation and increase of wealth.
Here, cash is not the constraint. Assets like land, property,
business corporate offices, high-end furniture, etc. are taken into
consideration.
-
Financial
planning does not require active participation by the concerned
recipients. It is the advisor who does most of the homework as far
as assessing your finances are concerned. While in wealth
management, active participation of the concerned recipient is
absolutely necessary. To preserve or accumulate wealth, one needs to
work persistently.

Having
spoken about the differences of financial planning and wealth
management on a broader note, let us also discuss some of the key
phases where financial planning and wealth management activities are
carried out:
Learning
phase-
It
first starts with financial management. You learn more about
investment strategies, businesses that operate in favor of consumers,
allocating your cash in a wise manner, budgeting and lot many. Though
you carry out the aforesaid tasks on a day to day basis, you first
need to familiarize yourself with how the financial system actually
works. Here no wealth management is necessary.
With
a wise follow-up of procedures pertaining to financial planning, you
invariably accumulate assets or create a sizeable amount of wealth.
It is at this stage, a proper wealth management strategy actually
comes into play.
Accumulation
phase-
Now,
you have started applying your investment strategies one by one.
Again, you just follow up with a rigorous financial planning
methodology. You may not require wealth management at the initial
stage. Here, you are at the threshold of amassing wealth. Once this
is done, you make use of wise wealth management techniques to
preserve your wealth or add more to it.
Retirement
phase-
Now
that you have inherited wealth on a large scale, you need to have a
proper wealth management system in place. Financial planning now
becomes the need of the hour as you need to make the right decisions
as to where you want to invest money to further enhance your wealth.
This is wise investment planning.
Estate
planning is another area of wealth management campaign where you have
to decide where you invest your money in, with respect to the
real-estate market.
In
a nutshell, you can conclude that wealth management is a part of
financial planning. We have seen the definition, differences and the
phases where financial planning and wealth management techniques are
extensively used.
