FINANCIAL PLANNING AND WEALTH MANAGEMENT

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Home / FINANCIAL PLANNING AND WEALTH MANAGEMENT

Financial Planning and Wealth Management are essential part of personal financial management. Even though financial planning and wealth management is related to money, they are significantly different. Understanding the differences between financial planning and wealth management is crucial as it will help you choose the right one throughout your financial life.

Financial planning is the process of making a comprehensive plan for managing day-to-day expenses and income to achieve your long term or short term set financial goals. While wealth management is concerned with managing your existing wealth and making changes in your portfolio to grow your wealth.

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What is Wealth Management.

Wealth management is the process of preserving your wealth and growing it over the long term. Usually, this process is adopted by High Networth Individuals (HNIs), business people, affluent individuals, or families. In other words, wealth management is a very niche professional advisory service that makes a personalized strategy using various financial products and services. Thus, it helps to secure wealth, grow and accumulate more wealth using existing wealth.

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The common activities of wealth management include identifying and leveraging profit-making activities, special structured products, capital gains assessment, estate planning, risk management, and tax management. It uses various financial products ranging from mutual funds, equities, bonds, gold, property, etc. Therefore, wealth management helps improve your financial situation through asset allocation.

Financial Planning

A financial plan is the road map for your financial life. It covers major financial areas of your life addressing aspects such as cash flow, savings, debt management, risk management, children’s education planning, taxes, retirement, estate planning, and of course, investments and a strategy for managing them. It is more than a guide. It is a written strategy that gives you a clear, pragmatic path to follow towards the accomplishment of your most important financial goals.


Having a financial plan is like having a travel plan - it identifies where youre going, how and when youll get there, how much will it cost, and things to do along the way. A personal financial plan looks at where you are today and where you want to go. Then it sets out all the steps you need to take to get there. Everyone who is earning should draw up a financial plan. The plan will help you get the most from your money and help you in achieving your financial goals in life.

Some people naturally resist the process of creating a Financial Plan. Initially, it seems overwhelming and/or just too much of trouble. However, the potentially devastating consequences of not having it are far greater than the initial discomfort that you experience of the process. For most people we have worked with, the hardest part is just making the decision to get started. Once the process has begun, most clients find it engaging and interesting.

Financial Planning includes various activities like debt management, cash flow management, risk management, contingency fund creation, etc. It uses various financial products like life insurance, mutual funds, fixed-income schemes, etc. Also, it helps to plan for future goals like education, marriage, buying a home or car, retirement, etc. Lastly, tax planning also plays a crucial part in financial management to save your hard-earned money.

Do You Need Financial Plan ?

Yes - if you have an income, a family or planning to have one in the future, retirement dreams, and for many other financial reasons / goals that are unique to you. No one can predict the future but one can certainly be better prepared for it. An effective financial plan will make sure that you are financially prepared to deal with the unexpected events and stormy times. If you don’t have one, you’re more likely to end up in a financial mess. On the contrary, if you have one and the recommendations thereon have been executed, most of your financial goals will be satisfactorily met. A good financial plan can alert you to changes that must be made to make sure a smooth transition through life’s financial phases, such as decreasing spending or changing asset allocation.

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By developing a financial plan you and your family:

  • Will have a better understanding of your current financial position.
  • Determine attainable retirement, education, insurance, and other financial goals.
  • Review goals, funding strategies, and alternatives to balance all goals.
  • Have the necessary financial resources set aside to fund your goals as they occur.
  • Reduce the effects of unexpected events such as disability, premature death etc.

You need not be very rich to have a financial plan. No matter how much you earn and at what age, a plan is important to make your life easier. As your financial situation influences almost every aspect of your life, a regular financial plan can help give you peace of mind and protect you from unforeseen, unfavorable situations. Once you have a working personal financial plan, you can use it to make informed financial choices. Having a good financial plan will allow you an over view of what you can afford. It will allow you to analyze your wants versus your needs. It also provides you a way to see how to avoid major financial mistakes in the future.

Risks Of Not Having A Financial Plan

You may be able to achieve what you want today but might not be able to achieve what you need few years down the line. Say, if you buy a new car now, you might not have enough funds later to buy your dream home.

You may not see the big picture. Say, you may grow your wealth by making good investment choices but end up being tax inefficient and pay more taxes than you need to.

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You may take a short-term view of an opportunity and make rushed financial decisions, or fall into some scam trap. Worst of all, you may end up doing nothing (and just thinking of doing something) and never achieve your financial goals.

You might become a victim of mis-selling and build a corpus of investment products that neither suits your financial needs nor your risk profile. You are very much likely to worry more about money and financial security. You may not know where you are today and where are you heading for.

Tips For Effective Financial Plan

  • Be realistic with your investment returns; don’t plan to outperform the markets.
  • Account for market risk and don’t assume the same return to repeat every year.
  • Don’t forget to plan for inflation, taxes and your financial planners fees.
  • Review your financial plan regularly to see if you are on track or need any changes in the plan.
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The need for financial plan is all the more very important in the turbulent economic times of today. If you don’t have one till now, don’t delay any more and Get it Now. Don’t be self-satisfied that you will be okay whatever happens. Face the reality. Unless you develop a financial plan early, it might be too late.

Overall, one thing that you must remember is that financial planning is a journey and not a destination. This means that you must create a financial plan and stick to it through the ups and downs of the market as well as in your own life stages too. If done it right, then financial planning can help you to achieve your financial mile-stones to lead a better life.

Financial Planning & Wealth Management : Key Diffrences

The following table summarizes the key differences between Financial Planning Vs Wealth Management:

Parameters Financial Planning Wealth Management
What is it? Goals-oriented  Opportunity-oriented 
For Whom? Every individual  High Networth individual (HNI)
Objective Manage expenses, save and invest to meet financial goals Preserve and grow existing wealth
Includes Cash flow management, investment planning, tax planning, retirement planning, contingency requirement  Wealth and risk tolerance assessment, asset allocation, wealth preservation, and growth strategy
Management Type Passive management Active management
Financial Decisions Based on financial goals, time horizon and risk tolerance levels Only on investment portfolio
Focus on  Comprehensive road map for financial life Immediate portfolio strategy