According to a 2018 survey on financial literacy among American adults, about 8 in ten (79%) adults agreed that they could still benefit from general financial or money management guidance.

If Americans are to become financially literate, they clearly have work to do. People don’t think of themselves having assets until they’re having issues managing them on their own!

Learning about asset management is one of the best ways to increase your financial literacy.

If it is one of the goals you want to achieve in 2019, you should check out our article, as well as continue reading on below to find out what is asset management.

What Is Asset Management?

Asset management refers to how an investment bank directs your cash and securities into investment options. These investments options are offered along with a significant range of alternative product offerings.

An average investor might not be able to offer these options.

The financial institution that holds your account can also offer you debit cards, credit cards and margin. It also conducts an automatic transfer of cash balances into brokerage services and money market fund.

Why Do You Need an Asset Management Account?

An asset management account is considered an all-in-one account. This account is not only found in asset management companies but also some private banks have them.

Asset management account combines checking, savings, money market and brokerage.
The money that you deposit earns interest and buys shares.

You can also write checks, acquire mutual funds and invest in bonds among other securities all from the same account.

Who Manages Your Asset Account and at What Fee?

In most cases, a portfolio manager manages these asset management accounts.

Normally, the fees might cost you between 1.0% and 2.75%, depending on your account balance. Some banks offer unique investing plans such as allowing you to create collateralize loans.

Once you find an investment opportunity that requires immediate liquidity, the collateralized loan provides the best alternative since no security is required. Some firms help you save more money by bundling additional services such as insurance policies on the same offer.

This way, you buy more products from the same institution.

How Does Asset Management Work?

Asset management offer products such as real estate, international investments, equity and fixed income. But there’s a minimum amount of money you should deposit into your account. This is why many think asset management is only for the rich.

When you deposit money into your account, the money goes into a money market fund. Money market funds have higher returns than a savings account.

An added advantage of asset management is that only one institution meets all your investment and banking needs. You don’t need separate accounts for brokerage and banking options.

What Payment Models Exist in Asset Management?

It is important to know how asset management institutions and professionals who distribute products and services receive compensation. There are different models in asset management and not all offer the same benefit.

For instance, a mutual fund might have a sales load of 5.75%, which the investor should to pay. This money pays the professionals (financial adviser or mutual fund salesmen) who placed you in that particular fund.

Asset management firms earn an annual management fee fetched out of a pooled structure.

This asset management fee varies depending on the firm. Integrated firms that provide other financial services may charge a lower cost. This is because the firm makes money by other means like charging commissions and transaction fees.

Other Fee Variations

Some firms may not charge you any upfront commission or transaction fees. But, they charge higher fees on other products or services. They then split these earnings between the firm and the adviser.

There are also ‘fee only’ asset management firms that do not take commissions or charge specific products. Instead, they only charge you management fees. This arrangement gives the company more objectivity in investment strategies.

Its products are for your benefit, rather than the number of fees or commission they stand to collect.

Are Asset Management Companies Created Equal?

There are different asset management firms out there. Some of these firms are generalists.

Under their conglomerate umbrella, they offer different products and services. Others focus on a particular segment of customers. Choose an asset manager that suits you depending on your specific needs.

See page if you need sound advice on personal finance and asset management.

What Should You Ask Before You Deposit Money?

Always ask how the asset manager is paid. Is the manager paid by any commissions, paid by a fee? Ask for a written copy that explains this. Second, ask who will be the custodian of your assets.

You need to sign a limited power of attorney. This limits the asset manager’s power to only trading in the account and can’t to do anything else. No one else will get access to your money apart from you.

Finally, ask if the institution has a Series 7. If they have a series 7 they are allowed by the law to accept commissions. Be careful.

What Is Asset Management and Why You Need It

What is asset management? It helps you to reduce financial risk, spreads out your wealth, as well as provides high level of liquidity.

As a result, asset management firms are one of the most popular types of buy-side financial institutions. Asset managers are essentially ‘stewards’ of their customer’s interest.

Browse through our useful tips category to see other articles related to finance and asset management.