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Asset Management Explained for Beginners

With more and more individuals looking for new instruments to invest in, asset management has turned into a separate business niche. Only in 2019, hundreds of top asset managers across the globe oversaw $104,4 trillion worth of different financial instruments. Years 2021 and 2022 have witnessed a stratospheric growth due to the pandemics and geopolitical situation.

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So, what does the term “asset management” mean? How to manage assets and who does actually deal with it?

What Is Asset Management

First of all, asset management is a business where an expert or advisor manages his or her customers’ money. In other words, a manager defines a key client’s goals in terms of investment and helps him or her accomplish those goals through portfolio diversification and asset management. In other words, an expert operates on customers’ behalf when purchasing and managing bonds, funds, stocks, and other financial instruments.

Although it sounds practically the same as broker, asset managers act a bit differently. They cooperate with individuals, commercial organisations, non-profitable institutions, and public firms of various sizes. At the same time, asset management service providers are generally huge corporations although one-person interaction is still possible.

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What Does an Asset Manager Do?

An asset manager is a proven expert or company’s representative. He or she is responsible for managing stock, securities, or money on the client’s behalf. The main mission of such interaction is to gain profit or a growing asset value in a pre-defined period.

Some may have heard of them as financial and investment advisors, wealth managers, RIAs, and so on. Here are some of the most popular asset manager types:

  1. Investment brokers. They perform as registered individuals or on behalf of the introducing company. They deal with buying and selling investment instruments and make profit on commission from every transaction.
  2. RIA. The abbreviation stands for Registered Investment Advisor. Once again, it can be either a firm representative or a registered individual. His main mission is to share recommendations and investment advice on how to manage available assets. RIAs charge annual fees for their services.
  3. Financial Advisors. Their mission is to help clients diversify their portfolios, which also means setting specific targets in the long run and ensuring achieving them through comprehensive asset management.

Key Responsibilities of an Asset Manager

Although asset management involves different people with different names, they all have actually the same responsibilities. They include:

  • Serving as experienced specialists in a specific market sector preferred by a customer.
  • Making prompt and proper changes in the client’s portfolio when needed to prevent the risk of loss.
  • Cooperating with other advisors to ensure full-scale segment coverage.

Sometimes, to achieve customers’ goals, asset managers team up with financial advising companies to ensure a larger expertise that eventually helps to accomplish different investment needs. The main goal is to stay focused on the customer and his or her preferences.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.