Asset Management Definition

How Do You Manage Your Assets?

Asset management refers to the practice of steadily increasing total wealth through the acquisition, maintenance, and disposal of investments with growth potential.

Clients can get this service from asset management experts. They may also be referred to as portfolio managers or financial advisors. Many people are self-employed, however some work for investment banks or other financial organizations.

KEY LESSONS

The goal of asset management is to gradually raise the value of a portfolio of investments while keeping risk under control.

Asset management is a service provided by financial institutions that cater to high net worth individuals, governments, corporations, and institutional investors like universities and pension funds.

Asset managers are subject to fiduciary obligations. They must act in good faith while making judgments on behalf of their customers.

 Knowledge of Asset Management

Asset management seeks to both improve the value and decrease risk. In other words, the first topic to be covered is the client's risk tolerance. Retirement fund administrators and retirees who depend on portfolio income are examples of risk-averse people. Any adventurous person, especially a young one, would wish to experiment with high-risk ventures.

The majority of us fall somewhere in the center, and asset managers work hard to pinpoint that position for each client.

Assisting the customer in achieving their financial goals while maintaining the parameters of their risk tolerance is the responsibility of the asset manager, who makes decisions on which investments to make or avoid. Stocks, bonds, property, commodities, alternative investments, and mutual funds are some of the most popular investment alternatives.

It is required of the asset manager to carry out a thorough analysis utilizing both macro and microanalytical methods. This includes examining company financial records, doing statistical analysis of recent market trends, and doing anything else that can assist in achieving the stated goal of client asset appreciation.

How Asset Management Firms Operate

Asset management firms compete to meet the demands of wealthy people and institutions for investments.

Check-writing rights, credit and debit cards, margin loans, brokerage services, and check-writing privileges are frequently included in accounts maintained by financial institutions.

Money that people put into their accounts is frequently invested in a money market fund, which provides a higher return than a standard savings account. Account holders have the option of using money backed by the Federal Deposit Insurance Company (FDIC) or non-FDIC funds.

Account holders also benefit from having a single organization that can handle all of their banking and investment requirements.

Only when the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act in 1999, was passed, were these kinds of accounts made feasible. Because of the Glass-Steagall Act of 1933, which was enacted during the Great Depression, banking and investment services had to be separated. They simply need to keep the "Chinese wall" between divisions up at this point.

An illustration of an asset management organization

To meet the needs of clients who want to explore banking and investing choices through one vehicle, under one roof, Merrill Lynch provides a Cash Management Account (CMA).

Investors get access to a private financial counselor through the account. This adviser provides guidance and a variety of investment choices, including foreign exchange deals and initial public offerings (IPOs), in which Merrill Lynch may participate.

Tiered interest rates apply to cash deposits. Deposit accounts can be connected so that when all eligible funds are combined, the right rate is applied. The Securities Investor Protection Corporation is a regulatory body that provides protection for the securities stored in the account (SIPC). Instead of protecting investor assets from inherent risk, SIPC shields them from the brokerage firm's own financial collapse.

The account enables free worldwide access to Bank of America automated teller machines (ATMs) in addition to customary check-writing capabilities. Wire transfers, fund transfers, and bill payment services are offered. Users may access their accounts and carry out a variety of simple tasks using a mobile device and the MyMerrill app.

Accounts with qualified assets totaling more than $250,000 are exempt from both the yearly $125 fee and the $25 charge for each sub-account owned.

What Distinguishes an Asset Management Firm from a Brokerage?

Institutions that handle assets are fiduciary businesses. In other words, they are legally obligated to operate in the best interests of their customers who provide them discretionary trading control over their funds.

Before closing a deal, brokers need the client's approval. (Online brokers allow customers to set their own transactions and make their own judgments.)

Asset management companies target the affluent. They often charge fees rather than commissions and have greater minimum investment requirements than brokerages.

Brokerage firms are accessible to all investors. The organizations are required by law to administer the fund as skillfully and by the objectives outlined by their clients as possible.

What Does a Manager of Assets Do?

When an asset manager first meets with a client, they discuss their long-term financial goals and the level of risk they are ready to take to achieve them.

The manager will then suggest a combination of assets that aligns with the goals.

The manager is in charge of developing the client's portfolio, managing it daily, making modifications as necessary, and routinely updating the customer on those changes.

Which Organizations Perform the Best in Asset Management?

According to worldwide assets under management (AUM) as of 2021, Black Rock (7.3 trillion), The Vanguard Group ($6.1 trillion), UBS Group ($3.5 trillion), Fidelity Investments ($3.3 trillion), and State Street Global Advisors ($3 trillion) were the top five asset management companies.