Asset management involves managing financial assets. Today, the term “Asset Management” is often used to describe this activity. However, according to the law on banking supervision, the correct term is “financial portfolio management.” Asset managers make active investment decisions for both private and institutional investors. They buy and sell stocks, other financial products, and tangible assets such as real estate. Their decisions depend on the client’s desires and objectives, especially when weighing risks.
Asset management for private investors
Private investors often lack the time to gain the necessary overview of financial markets. They also lack the experience to identify opportunities and make the right buying decisions. For this purpose, they can rely on the services of asset managers.
Unlike asset or investment advisors, they not only provide information about products and make recommendations on stocks and funds but rather act and actively trade on the markets in the interests of their clients. It is important to know that this position is not protected by law and can be found on the business cards of employees of less severe 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 clients. However, an investor must have a large amount of capital to use this service. Only then will the bank’s asset manager professionally manage his portfolio.
This service is available for liquid funds in the six-digit and often seven-digit range. Solvent clients with assets of at least €5 million are also considered high-net-worth individuals (HNWIs). A private investor with over €30 million in assets is considered an ultra-high-net-worth individual (UHNW). And this group of investors is more extensive than some might think. In 2016, according to the World Wealth Report website, the number of millionaires in Europe alone was just under 4.5 million.
According to PricewaterhouseCoopers, asset managers’ workloads will not decrease in the future. The total amount of assets they manage is expected to increase from €85 trillion in 2016 to €145 trillion in 2026. This includes not only private deposits but also investments by institutional investors, insurance companies, and pension funds.
Digitalisation has also long been a part of the 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 suitable real estate. The property manager is responsible for leasing and re-letting the property.
The scope of responsibilities covers the full range of services, from contracting to revenue control. In addition, the property’s attractiveness must be maintained through extensive maintenance activities to ultimately achieve the best possible sale price. If necessary, asset managers are also responsible for changing the property’s use and initiating the necessary renovation measures.
Renewable energy is no less challenging for an asset manager. In addition to building and maintaining systems, he or she is responsible for ensuring that the systems are available to produce energy with a high degree of availability, achieving the best prices for the energy produced, and making full use of subsidies. In addition, all employees must have the relevant expertise required.
The work of asset managers (or portfolio managers) goes beyond financial investments, as they also control and manage assets. An asset manager is not only a financial advisor to the client. The client grants the asset manager a power of attorney to make independent investment decisions and delegates all management of their money to the asset manager.
A licence alone does not qualify a company as an excellent asset manager. Nor is membership in professional associations a sufficient indicator.
A better indicator is to check your portfolio manager’s professional qualifications. Experienced managers are certified financial planners (CFPs), chartered financial analysts (CFAs), or chartered international investment analysts (CIIAs).
Personal impression is also important when choosing. You need to make sure that the portfolio manager maintains a certain professional distance from the client and does not give them any alleged insider advice. A good portfolio manager can be recognised by their many proactive questions about the client’s personal life and financial situation. Both the client and the portfolio manager should have the same understanding of risk.
Following our recommendations, you can easily choose a suitable management company, and amateurs will not manage your assets. Yes, you may spend a lot of time searching for an intermediary, but in return, you will receive many more benefits in the form of income, dividends and other benefits.
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