How to Choose The Right Asset Management Company For You

September 15, 2021

Asset Management Company

In a nutshell, asset management company manage the finance of both individuals and companies. Their value comes from making strategic investment decisions for their clients as a means of bolstering portfolios and wealth. 

Working alongside multiple investors, asset management companies can tap into the collective expertise around them and fully diversify the portfolios of their clients. This allows them to access lucrative options with much better capital appreciation prospects, all while mitigating the levels of risk associated with investing. 

Funds can be allocated to property, shares, bonds or just about any other assets capable of appreciation, depending on the intentions and goals of clients. If a client was after higher-risk, short-term profits, asset managers might opt to invest in the stock market. Whereas, if a client wanted a more secure, long-term return on their investment, an asset manager might opt to build a property portfolio. 

Understanding Asset Management

Asset management companies essentially take investor capital and set about growing it through a range of different investment opportunities. Asset managers can handle large volumes of investment through carefully constructed, internally formulated investment mandates and processes. 

While different asset management companies may offer their services to clients of varying degrees of wealth, many managers tend to offer their services solely to wealthy businesses and individuals due to the difficulty of offering services to smaller-scale investors. 

European Assets

(Image: Phoenix Investor Relations)

As illustrated in the chart above, asset management is already responsible for a significant amount of wealth. While the industry has grown exponentially in the wake of the 2008 market crash, the value European assets under management have been plateauing at between 12 and 13 trillion EUR since 2016. 

With such a large market, it’s perhaps no surprise that asset management companies have been considered essential among some wealthy investors. For high-net-worth individuals, it’s commonplace to set up private accounts with asset management firms. Here, they can deposit cash into their account and even use a third-party custodian in some cases. Once this occurs, the portfolio managers can spring into action and take care of the portfolio using a limited power of attorney. 

How Asset Management Works

Asset managers perform by working with client portfolios while taking numerous variables into consideration, including the individual aims, goals, circumstances and risk aversion of clients. It’s even possible for asset managers to base decisions on the ethical values of clients along with their personality. 

Portfolios can be customised to suit the client’s income needs, tax circumstances and liquidity expectations, all with the aim of efficiently delivering growth. 

More prestigious asset management firms could take a highly personalised approach to a client’s portfolio and cater to their every whim. It’s also common to see a relationship between an asset manager and their client last decades, with managed assets passed down to heirs in the process. 

Learning The Roles Associated With Asset Management

Successful asset management companies are built from a foundation of several key individuals who allow clients to strategically grow. 

Financial analysts play an integral role in asset management and are capable of researching investment options as well as conducting due diligence on potential opportunities. They can also offer informed advice on when would be best to buy and sell assets. 

Another essential role within asset management is filled by economists. It’s the task of economists to monitor the market climate and offer advice pertaining to their outlook. Most asset management companies regard the possession of a dedicated economist as essential. 

Finally, the role of the asset manager exists to roll the wealth of financial advice at their disposal into decisive action. Asset managers have the final say in internal decisions and can use the information supplied by financial analysts and economists to deliver strategies that suit the personal interests of their clients. 

Top risks from investment managers' perspective

(Image: Deloitte)

The necessity of such diverse roles within asset management is shown by Deloitte. Of a wide range of prospective risks, the vast majority of investment managers highlight the investments themselves as their primary risks – more than the threat of cybersecurity or regulatory limitations. 

Asset management companies that possess a range of workers in diversified roles can effectively insure themselves against the danger of poorly researched investment opportunities

What Makes Asset Management Different From Other Financial Firms

Financial firms can occasionally find themselves split between encouraging buys and encouraging sells. Asset management, on the other hand, focuses solely on growing portfolios for their clients, in this regard, their primary role is simply based on making intelligent purchasing decisions that ultimately boosts the value of the funds their clients hold. 

This approach is fundamentally different from that of investment banks, brokerages and insurance firms – all of which operate on providing access to funds being sold like stock purchases, insurance policies and mergers. 

Due to how these firms work, they typically operate with large businesses, while asset management companies with wealthy individuals as well as other companies. Again, traditionally, asset managers are granted a high level of freedom to grow their clients’ wealth and operate with a large degree of trust. 

How To Find & Choose The Right Asset Management Company

Finding the right asset management company for your needs is essential. Each company is driven by different insights which could lead to significant fluctuations in portfolio performance, depending on who you place your trust in. 

With any prospective asset manager, the first important thing to do is to look into their credentials. This will provide an insight into their legitimacy, and will also help you to see their level of experience and aptitude towards the portfolio you wish to create. 

Asset management companies will usually have various advisers who will carry different specialities in different markets – this means it could be worth checking out your chosen firm’s capabilities and seeing how they could potentially cater to your wants and needs in investment. It’s also worth looking for insights into exactly how the company in question operates and works with your wealth. 

Getting To Grips With Regulation

Another important consideration to make is to look into how reputable your asset management company is, and what their performance history looks like. If they’re found to be managing assets for thousands of clients with strong testimonials, then it’s likely that they are good performers and are trustworthy. 

Furthermore, exploring their history is great for gaining a perspective on how the company will perform for you on a personal level. Be sure to look into whether they are regulated – this is because regulation of any financial services company helps to ensure that they will invest your finance in a responsible manner. 

Taking Cost Into Account

Of course, it’s imperative that you consider the cost of the service that you’ll be getting from your chosen asset management company. Prices can vary wildly between different companies and is heavily dependent on the type of service that you intend to use with them. 

Perhaps counter-intuitively, it’s often the much larger asset management companies, that manage billions of pounds worth of client assets, that are capable of offering cheaper prices to their clients while maintaining a high level of profitability. 

However, this isn’t to say that smaller organisations can’t deliver an excellent service at competitive prices. You may even find that the quality of service among smaller asset management companies excels on a more personal level, with a rich level of experience offered by your manager. This means that it really pays to do your research when looking for a skilled professional to manage your assets at a manageable price. 

When it comes to picking a suitable asset management company, taking the time to sound out the right organisation for your needs can really make a significant difference in achieving your financial goals. With this in mind, it may certainly be worth your while picking up the phone and contacting some front runners to discuss the finer details of the service that they can provide for you. 

Once you’ve settled on an asset management company that you feel that you can trust, it’s important to avoid resting on your laurels, even if the early signs are showing that you’re making healthy returns on your investments. Be sure to regularly review the investments made on your behalf and compare any progress to make sure that they comply with your longer-term investment goals – as well as your short-term interests and ethics.

Written by Daglar Cizmeci
Investor, Founder and CEO with over 20 years’ industry experience in aviation, logistics, finance and tech. Chairman at ACT Airlines, myTechnic and Mesmerise VR. CEO at Red Carpet Capital and Eastern Harmony. Co-Founder of Marsfields, ARQ and Repeat App.

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