Why financial planning is a stepping stone towards wealth management?

There is always confusion between financial planning and wealth management. People think financial planning and wealth management is one and the same thing. However, that’s not the case. Financial planning is the first step toward wealth management. Both have very different purposes. The purpose of having a financial plan is to make sure all your personal finance aspects, then be it be your cashflows, your retirement, your other financial goals, investments, risk management, debt management, etc. are all done neatly and are in good flow syncing and balancing with your current life situation. On the other hand, the purpose of wealth management is only to create wealth.

Financial planning is making its own place in the investment industry with many intermediaries proposing their clients to have a financial plan in place. But investors usually chase returns and returns are what matters to them. This behaviour of investors is more inclined towards wealth management, where risk-adjusted returns matter more than anything else. While doing so people forget that they have needs that are to be taken care of.

So, when can you say a person is eligible for wealth management? A person would be eligible for wealth management when he has provisioned for all the needs that he has and is still left with a good amount of wealth which he wishes to put to work. That said, financial planning becomes the first step toward wealth management. Though, there is one myth that revolves around wealth management that it is only meant for HNI (High Networth Individuals) or UHNI (Ultra-High Networth Individuals). Wealth management is meant for everyone irrespective of assets, provided he has provisioned for his needs via the financial plan. Everyone who have a financial plan, need not necessarily go for wealth management, but one going for wealth management must have a financial plan in place.