An investment portfolio is a combination of various asset classes. These can include stocks, bonds, real estate, cash, gold, collectibles, currencies, and more. The selection of each asset can be made on the basis of your risk appetite, investment budget, financial goals, income, age, and other similar factors. It may be advised to keep a blend of different asset classes to ensure optimal diversification, reduce risk, and eventually maximize returns. However, by adding multiple asset classes, you also need to carve out sufficient time to manage these assets.
Creating a financial portfolio is not a one-time process or something you undertake a few times in a year. Financial asset management is an ongoing process that tracks, monitors, and modifies your investments as per changing market scenarios, altering life goals, and different life stages. As you age, grow in your career, or start a family, your requirements will vary, and so will your investment goals. Moreover, since the market is dynamic, it becomes critical to actively manage your assets. This brings the need to also hire a financial advisor or a professional asset management company that can guide and assist you along the way so that your financial progress does not stall.
Keep reading to learn more about financial asset services and why asset management can be crucial for a financially secure future.
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What is asset management?
Asset management refers to a service offered by a professional or a firm where an asset manager manages your investment assets for you. It can include buying, selling, monitoring, and managing your assets on your behalf. Professional asset management can be suitable for individual investors, high net worth investors, companies, institutional investors, and governments. Asset management helps investors handle multiple assets like stocks, bonds, real estate, commodities, mutual funds, private equity, currencies, index funds, exchange-traded funds, and more.
Asset management can include deciding the asset allocation, portfolio rebalancing, creating a financial plan, and changing it as and when required to suit your requirements and financial goals. In addition to this, asset managers also decide where to invest your money and what investments to avoid to ensure optimal growth.
What does an asset manager do?
Financial asset services can include a multitude of things depending on the client. For instance, the needs of a high net worth individual may be different from a corporation or a business.
However, typically, you can expect the following benefits from a professional asset manager:
- Monitor your investments by employing asset management strategies:
- Reduce errors to minimize losses:
- Help secure your future financially:
- Offer peace of mind:
Investing can be a time-consuming activity, especially in the case of high-value assets. Asset managers use several ways to cut down this time by managing your assets for you. These professionals use several asset management strategies, including research for the best options, comparing past performance and data to pick the best investment options for your future goals, using data analytic tools, and employing their professional insight and expertise to ensure the best possible outcome for your investments.
Professional asset management can help you minimize mistakes and improve your potential to earn better gains. Investing is a complex activity. It can take years to master and understand and may not be everyone’s cup of tea. Moreover, investing requires excellent attention to detail, the knowledge to understand different market phenomena, and adequate experience to make timely decisions. While there are many investment options out there that are suitable for new or inexperienced investors, many of them require adequate financial know-how. Asset managers can help you make better investment decisions if you lack the ability to do so yourself. They can help you understand the underlying risks associated with your investments and avoid the ones that may not benefit you in the long run. They also lower the chances of suffering a loss with in-depth research and study.
Investing helps to secure your tomorrow, and asset managers see to it that you are able to achieve your goals as per your expectations. Asset managers work in your best interest to ensure that your investment objectives are met with minimal digression. They help you build a corpus that caters to your diverse needs. They can be instrumental in your financial growth and significantly impact your future lifestyle and quality of life.
It can be frustrating to not see your money grow as you hoped. Likewise, the pressure of monitoring your investments, not understanding the reason for their rise or fall, and being consumed by other daily duties and responsibilities can lead to anxiety and stress. However, by hiring the best asset management firms, you relieve yourself of this stress. Once you have a professional on board, you can afford to have more peace of mind and know your money and future are in the right hands. Asset managers work with you and help you better understand your financial assets and performance.
Moreover, some asset managers registered with the Securities and Exchange Commission (SEC) are fiduciaries bound by a legal duty to act in your favor. So everything they do is in your best interest. This instills more confidence in you and ultimately assures you of your decisions, leaving all worries and insecurities behind.
What are the different types of asset managers you can hire?
Since the needs of each individual can differ, there are different types of asset managers that you can choose from. Keep in mind that the primary role of an asset manager is to manage your financial assets. However, depending on the designation, they have supplementary roles too.
- Registered Investment Advisors (RIAs):
- Financial advisors:
- Investment brokers:
- Financial planners:
- Robo-advisors:
An RIA is an asset manager registered with the SEC with a fiduciary duty to act in your financial interest. RIAs offer services covering a wide range of areas like investment planning, retirement planning, tax planning, etc. Typically, RIAs work with clients with at least $500,000 or more in Assets Under Management (AUM). Moreover, they may charge a percentage of AUM as their fee or levy a flat rate.
Unlike an RIA, a financial advisor may or may not have a fiduciary duty (make sure they are Fiduciaries, you do not want to work with an advisor that is not) to always act in your favor, but they can be very reliable for individual investors. A financial advisor, too, can assist in various aspects of financial planning like investing, budgeting, saving, tax planning, estate planning, retirement planning, insurance planning, and more.
An investment broker is like an intermediary between you and your investments. They facilitate the purchase and sale of assets in return for a commission or fee. Investment brokers can charge a commission on each stock or exchange-traded fund you buy or sell. Unlike financial advisors and RIAs, an investment broker does not follow the Fiduciary standard. Because of this I’d avoid investment brokers.
These professionals are a type of financial advisors in charge of planning your finances. All financial planners are financial advisors, but not all advisors are planners. The primary difference between the two lies in the fact that planners plan and advisors execute. Similar to financial advisors, financial planners offer assistance in multiple areas such as tax planning, risk management, retirement, estate planning, and more. They also advise clients on matters related to investing, retirement, saving for college tuition, and preserving wealth.
A robo-advisor is a new-age asset manager that may appeal to the tech-savvy generation of today. Robo-advisors work on algorithms. They ask you to fill out a survey and then offer financial advice on the basis of your input. They are not humans but computer algorithms that function without a personal touch. For this reason, they remove all scope of human bias but can also lack the empathetic touch of a human advisor or manager. Moreover, robo-advisors may be suitable for basic or elementary advice but usually fall short in complex investment issues. These are better for people with assets sizes under $100,000.
How much does asset management cost?
The cost of asset management can depend on the kind of financial asset services you choose. It can also differ for each firm. The best asset management firms may charge you more compared to the not-so-well-known ones. Having said this, asset management may include the following costs:
- Brokerage costs:
- Account fee:
- Management fees:
- Robo-advisor fees:
These are the costs of buying and selling stocks or carrying out a trade. The asset manager may charge a commission out of each trade, the costs of which can vary from broker to broker.
This can be a commission of the total of AUM or a flat rate charged annually, quarterly, etc. There may be a separate account opening or an account closing fee too.
Management fees can differ for passively and actively managed accounts. Usually, passively managed accounts have a lower fee than actively managed accounts, as the former requires less time and attention.
Robo-advisors also charge a fee based on the value of the assets they manage for you. This can either be a flat rate or a percentage commission. Robo-advisors generally charge an annual fee.
Asset management vs wealth management: what should you choose, and is it the same?
This is a common confusion that a lot of people have. The asset manager vs wealth manager question is a widespread dilemma many investors face. In order to make the right decision, it is vital to understand the difference between the two and what value each can add to your financial planning. Here are some points of difference to take note of:
- Asset management involves overlooking a client’s assets, such as stocks, real estate, bonds, currencies, commodities, mutual funds, etc. On the other hand, wealth management involves the management of all their wealth. This includes all cash inflows, outflows, spending, incomes, taxes, inheritance, and more. Wealth management may also include the finances of an individual and the family as a whole. Additionally, it can consist of business income and cash flows too.
- Asset management may only focus on capital appreciation. But wealth management can encompass several other aspects, such as capital preservation through insurance, estate planning, and tax planning. Wealth management includes numerous wealth management strategies to ensure the protection of your wealth in the long-term.
The decision to choose between asset management and wealth management can depend on your needs and financial goals. It also depends on your net worth and the value of your assets. Wealth management is usually preferred by high net worth and ultra high net worth clients, as they have multiple income sources and vast amounts of money to handle. However, asset management can be used by anyone.
To summarize
Professional financial asset management is essential if you wish to grow your net worth, achieve your goals, and reduce investment errors. You may also feel less stressed and more confident about your future by getting an expert on board. Moreover, even with the costs involved, the perks are far more significant and a lot more profitable. So, you have little to lose and plenty to gain. However, it may be advised to take a good look at your finances, objectives, and needs before you hire a professional. Make sure to assess your requirements so you know if you need a wealth manager or an asset manager. If you are unsure, you can consider reaching out to a professional financial advising firm and understanding your requirements better.
Use the free advisor match service to get in touch with a professional who can help assess your finances and advise you on how to buy, sell, monitor, and manage your assets to meet your financial goals. Based on your requirements, the platform scans through registered and qualified advisors to match you with an advisor suited to your financial needs and goals.
For more information on suitable asset management strategies for your unique financial requirements, visit Dash Investments or email me directly at dash@dashinvestments.com.
About Dash Investments
Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.
Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. Additionally, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.
CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.