What is Asset Management - Overview, Importance and Benefits
The step that follows making money is managing that money. And this can be a mammoth task for those who may not have the time to spare or complete knowledge of how markets work. Such people often delegate their money management to individual or firms/companies. These people who manage your money by investing it into a variety of assets are called asset managers or portfolio managers. You hand them the reins (albeit in a limited manner) to your earnings, after which they help you create, build, manage and grow your portfolio.
About Asset Management
When we talk about asset management, it can be in reference to either individual investors or organisations and companies. A simpler way to understand the same is by looking at this way- you avail the services of an asset manager who helps you decide where to put your money. The idea is to help clients generate returns on their assets and widen their financial portfolio.
There are individuals who work as wealth managers, and then there is the option of financial services provided by firms that either operate independently or as subsidiaries and divisions of banks and insurance companies. These asset managers usually put your money into stocks, bonds, real estate, private equity, or other capital assets. They make investment decisions for you to help grow your portfolio while also helping you mitigate risks. For the service provided, they charge their clients a fee.
What’s the point?
If you have a decent income, the smart thing to do would be to optimise your earnings by investing wisely. By putting part of your money into schemes and investment tools that help you make more money, you will be better poised to achieve your financial goals and chalk out a nice retirement plan. However, not everyone is born a financial expert, and outside help becomes necessary in such a situation. With the aid and advise of asset managers, you can put your money in options, such as stocks, Mutual Funds, NPSs, that would help generate good returns. Here, the role of the asset manager becomes crucial because he/she would suggest funds or investment picks that suit your portfolio, keeping in mind the market trends and risks involved.
Are asset management and wealth management the same?
Well, the terms are often used interchangeably and the idea behind the two concepts is pretty much the same. Financial advisors- whether asset or wealth managers- advise you on money matters. Wealth managers help their clients assess and plan their overall financial situation and provide them with specialised financial services (say, legal and tax advice), with long-term wealth creation as the goal. Meanwhile, asset managers deal only with the investment management part of their client’s portfolio. You could also look at the latter as a subset of the former, i.e. asset management can often be a part of the overall wealth management strategy of a client.
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* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action. Investments are subject to changes in investment laws. Please contact a consultant for an exact calculation of your liabilities.