Perhaps one of the most crucial decisions for investors when building a portfolio is the choice of an asset management company. What are they? What do they do? Why are they so important? How do I find one? These are the questions we’ll be providing answers to in this article. Read on.
What is asset management?
You can describe asset management as managing people’s money, and you’ll be right. It is that straightforward. But that wouldn’t paint a clear picture of what asset management truly entails.
For this reason, we’ll describe asset management as the systematic procedure of collecting, managing and developing assets owned by a firm or individual in a cost-efficient manner.
Asset management is all about investing a client’s assets based on the clients set financial goals and working to help them attain these goals by helping them create a diversified investment portfolio which may include bonds, stocks, money funds, or other securities.
This service can be provided by individuals and small and large businesses alike. The companies providing these services may be mega corporations, smaller wealth management firms, or one-person companies.
What is an asset management company?
Otherwise known as wealth managers or money managers, asset management companies are institutions that provide asset management services.
Asset management firms put capital collected from clients into investments such as stocks, bonds, real estate, and money funds, such as hedge funds and mutual funds, to generate the client’s profit over a specified period.
An AMC’s responsibility is to make strategic and enlightened investment decisions on behalf of its client to maximize the client’s portfolio.
Though you can find similarities, AMCs differ considerably from other financial firms such as insurance, brokerage, and investment banks.
While these other financial companies focus on selling to people [insurance policies, stocks, mutual funds, etc.], AMCs concentrate more on buying. They use their wealth of resources and professionals to make informed decisions on whether to buy stocks, bonds, or funds on behalf of a client, depending on their economic goals.
AMCs are held to fiduciary standards and generally charge for the services a predetermined percentage of the client’s total assets under management [AUM] as their professional fees. But depending on your contract may qualify for extra commissions when certain portfolio milestones are reached or surpassed. Some AMCs also charge a flat service fee for their services.
One key liberty AMCs allow clients is the opportunity to diversify their portfolios into various investment options. In addition, their pool of resources allows clients who ordinarily may not be able to diversify their investment because of limited economic capabilities to do so while offering advice and management ideas on how to grow these assets.
Who is an asset manager?
Asset management companies typically staff a wealth of financial professionals known as asset managers. Their responsibility is to manage and grow the value of assets and securities in a client’s portfolio on behalf of the client.
These financial professionals are usually referred to as financial advisors, financial planners, or registered investment advisors. Whatever the name, their rules are very similar, and their goal is to help manage and grow investments and securities.
The SEC or local and state financial authorities hold all asset managers to a fiduciary standard. This means they are legally obligated to act in their client’s best interest and not theirs alone.
Tips on finding the perfect asset management company
Whether you are a low or high-net-worth individual or company, taking the time to search for the right asset management company can save you a lot down the line.
Before you hand over the management of your finances to an asset manager, you should consider some of the following tips to help guide you:
Do your research
Without due diligence, asset management companies can sometimes be hard to differentiate from other financial firms because of the similarity in some of their functions. Not to mention that you can also find the same type of financial professionals working under their umbrella.
This is why you need to research a potential company to manage your assets. You need to understand the wealth manager’s specialty and ensure you are entrusting your finances to a trustworthy and reliable enterprise.
Decide on how much fees you can afford
Some AMCs charge a fixed percentage of your total assets under management as commission for their services; orders use varying fee structures, which can utilize a one-time fee and commission-based payments.
All these measures are put in place to help clients of all income levels easily access the services of asset management companies.
When looking for one, you must have the amount you’re willing to pay for an asset manager in the back of your mind. This would help you determine whether the company is a sustainable fit for your financial goals.
Know which financial services you need
AMCs usually provide different financial services under their corporate umbrella. These services are not fixed and may vary from company to company.
Some AMCs such as All Seasons Wealth provide services in specialties such as,
- Budget planning
- Debt management
- Investment Planning
- Estate planning
- Retirement planning
- Executive solutions
- Insurance coverage
- Tax planning
In addition to these, AMCs are also responsible for advising their clients about how best to navigate turbulent economic times and still grow their wealth.
Are you planning your retirement? Are you looking for the best insurance plan possible? Are you setting up a trust for your kids?
You should articulate which services you need and ensure your company of choice offers such services before hiring them.
Examine their credentials
A look at the credentials of any asset manager will give you a clue as to how legitimate and experienced they are in creating a portfolio for people in your asset class.
Because asset management companies usually have various professionals specialized in different market and investment options, you must verify the firm’s capabilities and ensure they can cater to your needs.
You can access the legitimacy of a financial professional using online verification platforms like FINRA’s brokerchecker provided by the non-governmental Financial Industry Regulatory Authority (FINRA) or the Investment Advisor Public Disclosure (IAPD) website by the SEC.
Look forward, not backwards
When considering a firm managing our wealth, it can become arbitrary to look into their past history and historical data to assuage any fears we may have about investing.
However, it is equally significant to look to the future and the projected competitiveness of the firm over the next few years. Being one of the baseline clients could give you a competitive edge in the money market in the near future.
Familiarize yourself with finance regulations
Exploring the history of your asset management firm and its reputation can be a good measure of a firm’s performance and trustworthiness.
It would also help you get to grips with regulations governing financial firms and institutions to effectively monitor the growth and stability of your assets under management.
Benefits of asset management companies
Organizations and individuals tend to benefit from asset management in their financial plans. Here are some important benefits of pulling assets together under an asset management company:
Greater investment options
Access to a broader class of assets allows AMCs to invest in asset classes individual investors may not be able to. For instance, Investing in a large real estate project like a power plant or dam is an investment that would not ordinarily allow low-earning individuals to participate. So instead, AMCs give these investors access to them.
Asset management firms usually hire financial professionals with extensive experience in investment management and specialized knowledge of asset classes like real estate and money funds that ordinary individuals lack.
This knowledge alone can be the defining difference between a good investment plan and a terrible one.
Economy of scale
The economy of scale is the cost savings gained from an increase in a company’s production level. This is particularly important for businesses and industries looking for cost-effective measures to grow their assets.
AMCs can provide economies of scale to clients by purchasing securities in large numbers and negotiating favorable commission prices.
Legally liable management
Being held to fiduciary standards means your asset management company has a legal responsibility to put your benefits in financial matters as a priority.
When you put your portfolio of assets under the management of an asset management company like All Seasons Wealth, you can rest assured they are looking out for your best interest.
Because of the equivocal nature of finance industry professionals, you must be careful when picking an asset management company to ensure you get the perfect asset manager suited to your financial needs.
Suppose you are looking for an asset management company in or around Tampa, Florida. All Seasons Wealth is a seasoned asset management and financial planning company boasting experienced and certified financial professionals and offering a wide range of financial services.
- Getting Ready To Retire
- Getting Married
- Preparing For Baby
- Selling A Business
- November Bond Report
- Wealth management tips for entrepreneurs
- Effective retirement planning guide for 2022 and beyond
- Personal financial planning – securing your finances for now and the future
- Is Your Bank Paying A Competitive Rate?
- All Seasons Wealth Newsletter – Q4 2022