Investment banking and wealth management, although both engaged in financial services, but there is a big difference in terms of business focus, customer groups and income sources. Investment banks mainly serve corporate financing needs through equity underwriting, debt underwriting, M&A advisory services, etc., with the core being capital market services. While wealth management mainly serves high-net-worth individual investors, providing customized wealth management plans and solutions. The core is asset allocation and management. In terms of customer groups, investment banks mainly face corporate customers, while wealth management faces individual HNW clients. For income sources, investment banks rely mainly on commissions and fees from financing transactions, while wealth management generates income through asset management fees.
Investment banks focus more on capital markets
Investment banks’ main businesses are equity underwriting, debt underwriting, M&A advisory services, financial advisory services, etc. The core is to serve corporate financing needs, connect corporate customers with capital markets, and act as an intermediary for direct financing. Therefore, the main customer group faced is listed companies or companies that want to go public. The income source is mainly various commissions and fees generated in the underwriting and advisory services process.
Wealth management centers on asset management
Wealth management provides customized asset allocation and wealth management solutions for high-net-worth individual investors. The core lies in asset management and allocation, designing suitable portfolios and products according to each client’s risk preferences and financial situations. Therefore, its main customer group is HNW individuals and families. The income comes from asset management fees and performance-based fees charged to clients.
Investment banks have higher business risks
As an intermediary connecting enterprises and capital markets, investment banks undertake higher business risks. Its revenue relies heavily on equity and debt issuance, M&A activities and other capital market transactions. In a depressed market environment, it will face greater pressure. While for wealth management, as long as asset prices do not collapse, its asset management business can remain relatively stable, with relatively controllable risks.
In summary, although investment banking and wealth management are all engaged in financial services, their business priorities and customer groups are quite different. One connects companies with capital markets, while the other provides individuals with customized asset management services. These result in differentiated business risks and income models.