Asset Management

Key takeaways

• Asset management involves investing and overseeing assets to grow value while managing risk according to a client’s goals and tolerance.
• Clients range from individuals and families to corporations, government entities, and institutional investors.
• Many asset managers have a fiduciary duty to act in the client’s best interest; fee structure and legal obligations vary by provider.

What is asset management?

Asset management is the professional process of building, monitoring, and adjusting an investment portfolio on behalf of a client. Managers select and allocate investments — such as stocks, bonds, real estate, commodities, mutual funds, and alternative assets — to pursue growth, income, or other financial objectives within agreed risk limits.

How it works

1. Establish goals and risk tolerance: Managers assess time horizon, income needs, and willingness to accept volatility.
2. Research and strategy: Teams use macro and micro analysis, financial statements, and market trends to identify opportunities and risks.
3. Portfolio construction and execution: Managers allocate assets across instruments and sectors and execute trades.
4. Ongoing monitoring and rebalancing: Portfolios are reviewed and adjusted to stay aligned with objectives and market conditions.
5. Reporting and communication: Managers provide performance updates and rationale for changes.

Types of asset managers

• Registered Investment Advisers (RIAs): Firms that manage portfolios and provide investment advice. RIAs are regulated and, depending on size, must register with relevant authorities.
• Brokers: Intermediaries who execute trades and may custody assets. Brokers do not always have a fiduciary duty, so their incentives and fees should be reviewed.
• Financial advisors: Professionals who recommend and may implement investment and financial planning strategies; some act as fiduciaries, others do not.
• Robo-advisors: Automated platforms that build, monitor, and rebalance portfolios using algorithms. They offer lower-cost, rules-based management suited to many investors.

Costs and fees

Common fee structures:
* Asset-based fees: A percentage of assets under management (AUM). Industry averages vary, often around 1% for smaller portfolios, with lower rates for larger AUM.
Transaction fees or commissions: Charged per trade or product sale.
Performance fees: A share of investment gains (more common in hedge funds).

Know whether your manager is a fiduciary and how they are compensated; commission-based incentives can create conflicts of interest. Many jurisdictions have rules requiring fiduciary standards for retirement advice.

How asset management firms operate

Asset management firms compete to serve individuals and institutions. Some large financial institutions combine banking and investing services, offering features such as cash management, debit/credit access, margin lending, and integrated advisory services. Deposits held at banks may be protected by deposit insurance up to regulatory limits, while investment products (mutual funds, stocks, bonds) are not deposit-insured but may be protected against brokerage failure by investor-protection schemes. Organizational and regulatory boundaries (often called “firewalls”) separate banking and investment operations.

Example (integrated cash-and-investment account)

Some wealth management firms offer cash management accounts that combine banking conveniences (check writing, ATM access, bill pay) with investment services and access to a personal advisor. Such accounts may sweep idle cash into yield-seeking funds, provide consolidated reporting, and offer digital access via apps. Protection for securities holdings differs from bank deposit insurance and is tied to brokerage protection mechanisms.

Asset management vs. brokerage

• Asset managers typically have discretionary authority and a fiduciary obligation to manage portfolios on clients’ behalf.
• Brokerages primarily execute trades and may not manage portfolios or act as fiduciaries. Some firms operate as both, so clarify roles and legal duties before engaging.

Digital asset management (DAM)

Separate from financial asset management, digital asset management refers to centralized storage and organization of media files (images, audio, video) so teams across an organization can access, edit, and distribute digital content efficiently.

Bottom line

Asset management aligns investments with a client’s financial goals and risk tolerance through professional research, disciplined portfolio construction, and ongoing oversight. Providers range from human advisers and institutional firms to automated robo-advisors. Before selecting a manager, understand their fiduciary responsibilities, fee structure, and the protections that apply to cash versus investment holdings.

Quick FAQ

Q: Who uses asset managers?
A: Individuals, family offices, pension funds, endowments, corporations, and public entities.

Q: How much does asset management cost?
A: Fees commonly range from a percentage of AUM to per-trade charges; pricing often declines as portfolio size increases.

Q: What is a fiduciary?
A: A fiduciary is legally required to act in the client’s best interest. Not all advisors or brokers are fiduciaries, so confirm the standard that applies.