Personal asset management is the practice of building individual clients’ wealth over time by buying, holding and trading securities that have the potential to grow in value. These investments typically include stocks, bonds and funds. Asset management professionals perform this service for private individuals or public or private organizations with a wide range of net value. Professionals that work with individuals are typically called portfolio managers, registered investment advisors, investment managers, wealth managers or financial advisors. Many work for investment banks or financial institutions, and others work independently. Regardless of their specific positions, asset managers often earn finance degrees like a Master of Business Administration (MBA) in Finance before starting their careers.
The private wealth management industry is growing even faster than the job titles within it, with $103 trillion of global assets under management as of 2020 (as of October 2022). Moreover, this number should grow to $145 trillion by 2025, providing a booming opportunity for aspiring asset managers.
What an Asset Manager Does
When an asset or portfolio manager meets with a client, they determine financial objectives and how much risk the client is willing to accept. Then, based on short and long-term goals, the manager conducts research using micro and macro analytical tools, including statistical analysis of market trends and projections of wealth accumulation over time based on different investing strategies, ranging from conservative to aggressive.
A client’s risk tolerance determines the investing strategies. Generally, as clients get closer to retirement age or when they need liquidity (such as to invest their gains in a child’s education or their business) they become more risk averse. Clients with a longer time horizon can afford to ride out market swings so that they may opt for greater potential rewards over the long term, with volatility along the way. Each account for an individual client may be overseen differently as well. For example, many clients have IRAs and 401Ks they prefer to have managed more aggressively while they handle their regular trading accounts more conservatively.
Based on client conversations and their subsequent research, managers recommend a mix of investments or offer alternative investing approaches. Once clients agree to an investing strategy, managers create and oversee clients’ portfolios, making necessary changes and communicating regularly with clients about those changes. Because financial institutions that employ asset managers typically have specialists across many market segments, asset managers often provide their clients with access to the expertise of a team of sector specialists. They may also inform clients about timely opportunities, including initial public offerings.
Asset managers are compensated in various ways, depending on the investing models used in the recommended securities and the employer’s business model. Compensation comes in the form of active investment management fees, passive management fees on money invested in funds that mirror benchmarks (such as exchange-traded funds) and brokerage trading fees. Active and passive fees typically come as an annual percentage of assets under management, but some employers use flat fee structures. There may also be additional fees, such as annual account fees.
Types of Asset Managers
There are several types of financial asset managers:
Registered investment advisers (RIAs) advise clients on investments, manage portfolios and advise on larger financial planning topics, including retirement, insurance and estate planning. RIAs have a fiduciary duty to act in clients’ best interest and offer the lowest-cost products to meet clients’ needs. If they have more than $100 million in assets under management, they must register with the U.S. Securities and Exchange Commission (SEC) or state.
Investment brokers are investing intermediaries for their clients. Otherwise known as brokers/dealers, they hold custody of client portfolios and buy, hold and sell stocks and securities. Brokers may or may not have a fiduciary duty, depending on the employer’s policies. If they do not have a fiduciary duty, they may offer investment advice that may fit client objectives but with higher commissions or fees than a fiduciary would be obligated to recommend.
Financial advisors are similar to investment brokers, with the role of recommending investments and buying and selling securities on clients’ behalf. They may or may not be fiduciaries. Financial advisors may or may not work for an institution and also offer general and specific financial advice for a fee.
Robo-advisors provide personal investment services through computer algorithms that analyze investment objectives, buy and sell securities according to programmed goals and risk levels and monitor and rebalance positions. The advantages of robo-advisors are affordability and consistency over time.
Training for Success in Asset Management
With core courses in financial management and economics, as well as concentration courses in financial analysis, international finance and financial markets and investments, Avila University’s online MBA with a concentration in Finance program prepares graduates for successful careers in asset management. The curriculum of this IACBE-accredited program develops the knowledge necessary to be a financial decision-maker who can benefit individual investors and organizations.
Learn more about Avila University’s online MBA with a concentration in Finance program.
