The job of an asset management company (AMC) is to serve its clients by directing their wealth or investment portfolio. This service involves pooling funds from all types of investments, including stocks, bonds, real estate, equity, and partnerships. A client's portfolio is managed to keep in mind their risks, preferences, and unique circumstances.
This article discusses the basics to know about asset management. Here's what you need to know before committing to an AMC. Asset management - What it is Any asset management company manages its client's money to identify their financial goals. These companies help accomplish every business's objective by guiding them at every inflow or outflow of funds or valuable commodity. Institutes that qualify for asset management include large and small-sized companies, nonprofit organizations, public companies, and regular individuals. Likewise, companies that offer asset management services can be huge corporations, like BlackRock Inc, Vanguard Group, Fidelity Investments, and State Street Global Advisors. Alternatively, it can also be a one-person operation. The benefits of asset management Along with appropriate financial guidance, asset managers also help their clients earn more with investments, eventually reaching their financial goals sooner. And a financial goal could be anything like buying a new home, collecting college funds, or planning an early retirement. Asset management - How it works Like any other financial company, AMCs are directed to work by their mandate investment processes that are internally formulated. While asset management firms cater to individuals and large companies, they may have different rules and policies for every client. Big clients with generous investments may have a private account with AMCs, where they deposit cash and give their asset managers limited power of attorney. Asset managers become investment decision-makers. This allows them to decide on which securities to buy and sell on behalf of their clients. This is a part of maintaining a client's financial portfolio. It involves assessing their client's income, liquidity expectations, and tax liabilities. The planning and strategic actions serve to meet the client's timely financial goal. Types of asset managers There are varied services provided by different asset managers. They include Registered Investment Advisors who are compensated with annual fees; Investment brokers who are compensated with sales commissions; and financial advisors who have a fluid compensation. This may vary with the services provided. Costs involved The cost of asset management varies with different strategies, investing models, and asset managers. But if you are planning to invest with a firm, there is a list of fees that need to be studied before committing.
  • Active investment management fees - Typically charged 1% annually
  • Passive management fees - Ranges between 0.20% and 0.50% annually
  • Robo-advisor management fees - Ranges between 0.20% and 0.50% of managed assets
  • Brokerage fees - For online traders, it could range between 0% to 50% per trade
Be sure to ask your investment company for any additional fees like annual account fees or closing fees. How long is the association with an asset management company? The duration depends on the size of investment made and the financial goals set by the firm. In the case of individuals and small companies, the relationship could span anywhere between 2-10 years to see substantial change. It's common knowledge that big investors and asset management firms may share a connection that passes down to the next generation or even further ahead, as managed assets are usually transferred to heirs.