Asset management, in general, refers to the monitoring of any asset that an individual owns that is valuable to them. In the financial sector, however, asset management benefits most commonly refer to the management of an individual’s investments, such as stocks, bonds, and any other instrument used to grow their net worth.
Asset management is a thriving industry, with around $110 trillion in assets under management (AuM) globally. According to PwC’s estimate, by 2025, AuM will have nearly doubled, expanding by 6.2% per year from US$84.9 trillion in 2016 to US$145.4 trillion in 2025, with the developing economies of Latin America and Asia Pacific experiencing the highest development.
Two main goals of asset management
There are two primary aims in financial asset management: generating wealth and keeping risk reasonable. The level of risk is determined by the client’s level of comfort. If you, as an investor, do not want to or are unable to manage your money due to a lack of time or knowledge, you can delegate this duty to an asset manager.
The asset manager you select should ideally be entirely autonomous, independent, and hence free of the conventional banking restraints. If he is licensed and controlled by a state regulatory authority (SEC in the United States, FINMA in Switzerland, BaFin in Germany, etc.), you have a dependable, financially solid, and respected service provider on your team.
Types of asset managers
There are various different sorts of asset managers to be aware of. They are as follows:
Investment brokers
An investment broker is a person or company who works as a middleman between investors. Commissions for investment brokers are derived from fees levied on each traded stock, a maintenance charge, or the sale of proprietary items. They have no fiduciary obligation.
Financial advisors
A financial adviser can purchase and sell stocks on behalf of their customers, as well as provide advice on matters such as insurance and taxes. They may or may not be subject to a fiduciary obligation.
Financial planners
A financial planner is a sort of financial counselor who takes a more comprehensive look at their customers’ finances. They talk about things like saving money, managing money, and investing. Some are fiduciary in nature. Their fees might be hourly, fixed, or a percentage of total assets.
Robo-advisors
A robo-advisor may be less expensive than a human investment manager. This service gathers information about your investment style and financial goals before managing your money using an algorithm with little to no human participation.
Working with an asset management firm is another possibility (AMC). They develop pooled investment funds for investors to invest in, such as mutual funds or exchange-traded funds. They construct either public or private funds, with private funds often being more risk, less regulated, and limited in terms of who may invest.
The benefits of asset management
As previously said, a smart capital investment necessitates professional skills and, most importantly, time. You should posses the absolute willingness to engage with markets on an ongoing basis. Those who do not want or are unable to do so are in the correct place with an asset manager, who provides:
Expertise
The major advantage of traditional asset management is the experience that asset managers bring to the table, as well as the capacity to tailor this expertise to the needs of particular customers.
Asset management knowledge should also involve the ability to appropriately characterize clients based on consultation session comments. Client profiles should incorporate not just the client’s requests and unique requirements, but also the client’s risk capacity and risk tolerance.
Assets are subsequently allocated to suitable and risk-adjusted investment vehicles such as equities, bonds, precious metals, commodities, or currencies based on customer profiles. When the asset manager actively manage the portfolio, their knowledge must extend to picking the appropriate particular investment vehicles, such as buying certain stocks based on fundamental research.
Investment execution and monitoring
Asset managers are in charge of carrying out and monitoring each investment plan. They should know exactly where and when to buy and sell financial items to maximize earnings, and they should manage all transactions on their client’s behalf. Also, they should review and rebalance portfolios of investments as needed.
Flexibility
The capacity to adapt your investments to life changes. Marriage, children, job change, divorce, relocation, real estate acquisition, death, occupational handicap are just a few of the situations that can have a long-term influence on your investment. There should be short notice periods.
Independence
Bank-independent managers will not “sell” you complex and difficult-to-understand goods; they are autonomous, independent, and solely interested in your business. Because, in the end, it’s not about the bank generating money; it’s about you, the client, making money.
Access just to you
Some asset managers have unique access to investment vehicles that cannot be obtained through other methods. These may include individual firm shares, stocks that have not yet been made accessible through an initial public offering (IPO), or information or consultancy that is difficult to obtain. The worldwide openness trend in financial markets has prompted concerns regarding exclusive access arrangements.
Professionalism
A good asset manager will handle your money professionally, that is, without emotion and solely in your best interests. He will tell you of all options, as well as the dangers and expenses associated with them, and will advise you against investments that are not fit for you.
Transparency
You will be kept up to speed on the latest developments at least quarterly, but more frequently if necessary. You understand how your assets are performing and have a comprehensive picture of costs. A competent asset manager, like a good tax adviser, always pays off for you.
Saving time
Aside from health, maybe the most vital commodity, and currently a true luxury. Your asset manager takes care of everything that you would usually have to devote time in, allowing you to focus on the things in life that are essential to you.
