Asset management is a subset of wealth management and refers to the practice of buying and monitoring securities, real estate and other investment products to generate a return for clients.
An asset manager works with individuals, organizations and institutions and oversees their assets, including money, real estate and securities. They may manage their assets through hedge funds, private equity funds, stocks, mutual funds and other investment vehicles. Although the primary goal of an asset manager is to help the client earn money, they also must protect the client’s money by assessing and lowering their risk level. They provide these services for a fee, usually calculated as a percentage of the value of the assets they manage.
Customers pay asset management companies for financial services. These services include buying and selling stocks, bonds, mutual funds and real estate to increase their wealth over time. The clients rely on the asset manager to help them meet their financial goals by choosing investments that can potentially make money and getting rid of the ones that may cost them money. Asset managers may have titles like registered investment advisor, investment broker or financial advisor.
Asset management companies fall on what is sometimes called the buy side of the industry. This means they help clients decide – and in some cases have complete authority to choose – what to do with their assets. They stand in contrast to sell-side firms, namely banks and brokerages that sell investment products. Sell-side firms also provide a valuable service by doing market research on different investment products that asset managers may use when making decisions.
In exchange for these services, asset management firms charge clients a fee. This fee typically is a percentage of the client’s assets under management. In most cases, firms charge between 0.2% to 2%. However, asset managers who use highly aggressive investment strategies that potentially generate greater returns – like those managing hedge funds – may charge higher fees.
As of 2022, more than half of the top asset management companies in the world have headquarters in the United States. Ranked by total assets under management, the top 10 companies include:
- BlackRock: $9.57 trillion (U.S.)
- Vanguard Group: $8.1 trillion (U.S.)
- USB Group: $4.38 trillion (Switzerland)
- Fidelity Investments: $4.28 trillion (U.S.)
- State Street Global Advisors: $4 trillion (U.S.)
- Morgan Stanley: $3.32 trillion (U.S.)
- JPMorgan Chase: $2.96 trillion (U.S.)
- Credit Agricole: $2.87 trillion (France)
- Allianz Group: $2.76 trillion (Germany)
- Capital Group: $2.7 trillion (U.S.)
Other names commonly recognized in the U.S. include Goldman Sachs ($2.39 trillion), PIMCO ($2 trillion) and Edward Jones ($1.7 trillion).
Although asset management firms work primarily with high-net-worth individuals, their clients include retail investors and institutional investors in the private and public sectors. Knowing the role of an asset management firm can help clients choose and evaluate the performance of their asset managers.
Individuals who have money invested in a 401(k), mutual funds, exchange-traded funds and the like also benefit from the work of asset managers. These professionals may decide how to invest the funds in a 401(k), which directly affects the investments of employees. Understanding what they do and the amount of research they put into their choices can help individual investors decide whether to trust the allocations chosen for them or choose how they want to invest their money when that’s an option.
Asset management falls under the broader umbrella of wealth management. While asset management services focus solely on the individual’s or organization’s assets – cash, real estate and securities – wealth management services encompass taxes, insurance and loans. A wealth manager may have access to a client’s checking account and permission to pay bills and handle other financial situations.
An asset manager manages assets on behalf of their clients. They take time to understand their clients’ needs, research products that potentially meet those needs, and buy and sell products like securities. A broker processes the purchase and sale of these products.
- Current: accounts receivable, cash, inventory, office supplies
- Fixed: buildings, land, machinery, patents
- Intangible: brands, intellectual property, patents, trademarks
- Non-operating: interest income, short-term investments, vacant land
- Operating: accounts receivables, buildings, cash, patents
- Tangible: buildings, equipment, inventory, land, office supplies