Asset management. What is the essence?

By March 10, 2021 March 11th, 2021 Investments
Asset management

Taking care of financial assets is the task of asset management. Today, the term “Asset Management” is often used to refer to this activity. According to the law on banking supervision, this correctly sounds like “financial portfolio management”. Asset managers make active investment decisions for both private and institutional investors. They buy and sell stocks and other financial products, and tangible assets such as real estate. The decisions made depend on the client’s wishes and goals, especially when it comes to weighing risks.

Asset management for private investors

Private investors often do not have the time to get the necessary overview of financial markets. Besides, they lack the experience to identify opportunities and make the right purchase decisions. To do this, they can rely on the services of asset managers.

Unlike asset or investment advisers, they provide product information and advice on stocks and funds and act and actively trade in the markets to benefit their clients. It is important to know that this position is not protected by law, and you can find it on the business cards of employees of less serious financial service providers. But this is rather an exception.

Asset managers in the banking sector

Well-known private and commercial banks have excellent asset managers who act on behalf of the bank’s customers. However, to use this service, the investor must have a more considerable amount of capital. Only then will his portfolio be professionally managed by the bank’s asset manager.

Access to this service is provided for liquid funds in the six-digit and often in the seven-digit range. Mainly solvent clients with assets of at least 5 million euros are also called high-net-worth individual (HNWI). A private investor with more than € 30 million is considered an Ultra-high-net-worth individual (UHNW). And this group of investors is more significant than some might think. Back in 2016, according to the World Wealth Report, the number of millionaires in Europe alone was a little less than 4.5 million.

According to PricewaterhouseCoopers, the volume of work of asset managers will not decrease in the future. The total amount of assets they manage is expected to increase from 85 trillion euros in 2016 to 145 trillion euros in 2026. However, this includes private deposits and investments by institutional investors, insurance companies, and pension funds.

Digitalization has also long entered this industry. More and more processes are being automated – from consulting to buying and selling financial products.

Real asset manager

Real asset management has a broader portfolio of tasks than classical asset management. In the case of an alternative real estate investment fund, the management task begins with selecting a suitable property. The property manager is responsible for the delivery and transfer of a real estate for rent.

The scope of responsibilities covers the full range of services – from contracting to revenue control. Besides, the property’s attractiveness must be maintained through extensive maintenance measures to achieve the best possible selling price. If necessary, asset managers are also responsible for changing the property’s use and initiating the measures needed to update it.

No less complicated for the asset manager are the tasks in the field of renewable energy. In addition to building and maintaining systems, he is responsible for ensuring that systems are available for energy production with a high degree of operational readiness, achieving better energy prices and making full use of subsidies. Besides, all employees must have the necessary experience.

The work of asset managers (or portfolio managers) goes beyond financial investments because they also control and manage assets. The asset manager is not only a financial advisor to the client. The client gives the manager a power of attorney to make independent investment decisions and transfers the management of his money to the asset manager.

The license alone does not qualify the company as an excellent asset manager. Membership in professional associations is also not a good indicator.

The best indicator is to check the professional qualifications of your portfolio manager. Experienced managers are certified financial planners (CFPs), certified financial analysts (CFAs), or certified international investment analysts (CIIAs).

Personal experience is also important when choosing. It is necessary to make sure that the portfolio manager maintains a certain professional distance with the client and does not give him imaginary insider advice. A good portfolio manager can be recognized by his many active questions about the client’s personal life and financial situation. The client and the portfolio manager must have the same understanding of risk.

Following our recommendations, you can easily choose the right management company, and amateurs will not manage your property. Yes, you may spend a lot of time looking for a mediator, but instead, you will receive much more benefits in the form of income, dividends and other benefits.

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