What is the difference between wealth management, legacy planning, estate planning and financial planning?

What is the difference between wealth management, legacy planning, estate planning and financial planning?

– Paul Damant, CFP (Director, Cornerstone Investment Advisory Services and Managing Director, Cornerstone Financial Services Group of Companies)

You’ve probably asked yourself this question many times. You also might have asked: “How do I know which one I need and when do I need it?” Many times, financial matters intertwine to such an extent that it is hard to distinguish one service or area of expertise from the another. The best way to distinguish these financial services is to look at how they are defined, what they offer and how they are interrelated.

Financial Planning

Here the focus lies on what you are doing or planning to do, to meet your specific short- and long-term financial goals. These goals can include saving for retirement or your children’s education, making sure you have financial support in the event of severe illness or simply ensuring that your loved ones will be financially independent in the event of your death. This process is called financial planning. A qualified and licenced financial planner will assist you in assessing every aspect of your financial life to help design and regularly review a financial plan that changes as your life changes.

Wealth Management

After designing your financial plan, you will need to engage the services of a suitably qualified investment or wealth manager to assist you in navigating through the morass of investment options both locally and internationally. Your investment or wealth manager should construct your investment portfolio in accordance with your investment policy statement which would have been developed after considering your risk profile, investment time horizon, cash flow requirements, etc. Your investment policy statement will address suitable local and international investment products, asset allocation, monitoring and portfolio reporting frequency, levels of discretion in re-balancing assets, etc

Estate planning vs legacy planning

Estate planning refers to the planning and management of the transfer of your estate after you pass away. Your estate can include anything from property, vehicles, cash, valuables or businesses.  The main purpose of a well-managed estate plan is to ensure that the correct assets are transferred to the correct beneficiaries, ensuring the transfer is done in the most tax efficient way and arranging appropriate guardians for any minors that may be left behind.

Legacy planning, however, is a more holistic view of your estate, your financial wellness and your legacy. It includes the expert management of your wealth while you are alive and should also consider non-financial assets that are pivotal to your legacy. These may include the core values that you have lived by, responsibilities and expected behaviour you would like to pass onto others and even other wishes like community involvement, stories, wisdom and life lessons. In short, without undermining the importance of wealth and asset management, legacy planning acknowledges that there is much more to what you leave behind than the things you own and the wealth you have accumulated.

How are all these services interrelated?

As evident from the various definitions, all these services rely heavily on each other and intertwine at various touchpoints. Setting up an investment portfolio without knowing what you are planning to achieve seems illogical.  Or, what good is setting up a legacy plan without a suitable and well managed financial plan to achieve your financial goals while you are alive.

A good analogy would be building a house. During this process you will need an architect, a builder, an electrician and site surveyor. Although these roles are very separate and specialised, they are completely interrelated and all of them need to work as one entity to ensure perfect home is completed. That is how financial planning, wealth management, legacy and estate planning work together.

Getting the right advice

The last and probably most important piece of your legacy is getting expert advice and guidance from a qualified and experienced team of financial service practitioners. The word ‘team’ is important, because a wealth manager, an estate planning specialist and a financial planner are all very different fields of expertise and you need all of them to reach the pinnacle of your financial wellness.

Cornerstone has perfected these fields and we offer our clients a truly bespoke financial solution for every aspect of their financial wellness. Cornerstone Investment Advisory Services’ along with Cornerstone Financial Planning and Cornerstone Fiduciary Services are the perfect trinity to handle all your investment, financial and estate planning needs.

Get in touch today to find out more about our exclusive services – call us on 011 794 6611 or email info@csias.co.za. Also, feel free to share this article with friends, family and colleagues and remember to find and follow us on Facebook, LinkedIn and Twitter.


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