Bauer Wealth Blog

Wealth Management vs Investment Banking vs Financial Planning

Dec 20, 2019 8:30:00 AM / by Stephen Heitzmann

There is a notable amount of crossover among the various sectors of finance, but it is critical to recognize the underlying differences between each. Wealth management, investment banking, and financial planning each have distinguishing characteristics that may help you understand which is best for you. The most important difference you’ll notice is WHO each sector serves best. Since these sectors have many of the same “Services” offered - it’s more important to understand who those services are for.


What is Wealth Management? (What wealth managers do)

Wealth management provides financial services for mostly high net worth individuals and ultra high net worth individuals.Occasionally, less wealthy people look for wealth management services to soon (or eventually) become a high net worth individual. Some wealth managers work with people holding assets in the 50k-500k range. Others prefer to only work with clients managing millions in assets. The important thing is to find a firm that aligns with you current status and goals


Another thing you’ll notice is the type of client-firm relationship. Wealth managers usually work one-on-one with their clients, while investment bankers typically work with multiple corporate clients.


Wealth management is simply money management, but with a deeper understanding and appreciation for investing and protecting wealth. Wealth management firms make money by collecting small fees for the services they provide. In the area of investments, clients indirectly manage their account and investments with an advisor. Typically discretionary investment funds that are traded on behalf of the client by one of the investment professionals at the firm.


Wealth management firms also provide clients with complementary financial services. Clients can access virtually any type of investment or financial service with a wealth manager. In addition to investment services, wealth management clients are occasionally provided with tax planning, estate planning, and retirement planning services.


This these services is typically split between relationship managers and investment professionals. The job of the relationship manager is to know the client. The job of the investment professional is to know the investments that are considered by, and for, the client.


It is the relationship manager who is primarily responsible for meeting the client's needs and wishes, and who most often meets directly with the client, although investment professionals are frequently included in regular, scheduled client meetings.


In the case of ultra high net worth clients, there may be an entire team of people assigned to a client's account, but there is still usually a single relationship manager assigned to oversee the account and to serve as the firm's primary representative.


The division of labor between the two aspects of wealth management can be seen as somewhat resembling the two aspects of relationship management and project execution that exist in investment banking.

What is Investment Banking? (What investment bankers do)

Investment banking offers similar services, but to corporate clients and businesses. Investment bankers excel at managing businesses' finances and navigating  the complexities of multi-billion-dollar deals. They are adept at leveraged buyouts and help clients resist hostile takeovers or poor money management mistakes. Investment banking can be considerably exciting from time to time but also relatively plain during long phases of inaction.


Investment bankers must understand the most critical industry-specific factors driving the success or failure of a business. While market analysts are experts are evaluating stocks, investment bankers must be experts at the fundamental evaluation of businesses.


In addition to skills with numbers and basic accounting, investment bankers must also think creatively.  They devise the best possible means of arranging financing and structuring business deals.


The actual functions and responsibilities of investment banking assume two positions: account managers and operations specialists. Account managers act in the lead position of developing and maintaining relationships with clients and seeing that their needs are properly met. Operations specialists execute investment banking services, such as an IPO or stock buyback.


What is Financial Planning? (what investment bankers do)

Financial planning is the strategic process of setting goals, measuring assets, allocating resources, predicting financial needs, and creating a plan to achieve specific financial goals. Financial planning includes many of the services offered in Wealth management, but typically aimed to help everyday average investors. Middle-class individuals or families use financial planning to make the most of what they’re able to invest and save from their salary.


Many things can be involved in the total process of financial planning. Most often; investing, asset allocation, and risk management. In many cases, tax, retirement, and estate planning are typically included as well.


Financial planning is critical to help individuals get the most out of their money. Careful planning helps individuals and couples set priorities. It provides structure to work steadily towards long-term goals. It may also provide protection against the unexpected, by helping individuals prepare for things such as unexpected illness or loss of income.


Financial planning means different things to different people. For some, it means planning investments and security for retirement. For others, it may mean planning savings for a dependent's college education. It may even involve making career-related decisions or choosing the right insurance options for your lifestyle.


Many choose financial planners to help them reach their financial goals. A financial planner provides advice and guidance for a wide spectrum of goals and issues. Find a financial planner that is willing to listen and truly understand your story. Every situation is different and you’ll need a custom crafted game plan for your personal goals.


How to get started with a Wealth Manager or Financial Planner

Bauer Wealth management is not an investment banking firm. We serve individual clients as wealth managers or financial planners. We have experienced wealth advisers ready to answer your questions. If you decide to look for a wealth manager elsewhere, remember to always ask if they are an independent RIA. This will help ensure you're working with someone who has your best interests in mind. 

Check out our fiduciary oath to see why an independent RIA is a better option for your personal interests Whenever you're ready to start talking about wealth management options, set up a free call/meeting here.

Topics: Wealth Management, Financial Planning

Stephen Heitzmann

Written by Stephen Heitzmann

Stephen Heitzmann is the CEO of Bauer Wealth Management, a Wealth Management Firm, based in Colorado Springs, CO. Bauer Wealth Management is a Registered Investment Advisor (CRD#: 152977/SEC#: 801-71090) with the Securities and Exchange Commission. This article does not represent an investment recommendation or endorsement of any kind. Please consult with your advisor regarding your specific situation. Investing in securities does involve risk of loss that clients should be prepared to bear. The risks can range from failing to keep pace with inflation to losing some or all of the money you invest.