A Beginner’s Guide to Asset Management

If you’re new to the idea of thinking about your financial future, then ‘asset management’ may be something you’ll hear a lot about. But what is it?

Two of the terms widely used in the financial services market when talking about asset management are financial planning and investment management.

What that means for you may not always be clear, and so here we’ll answer some of the common questions about asset management to help you assess if it’s something you should be exploring further.

What is asset management?

Most simply put, asset management is a combination of independent financial advice and investment management services to help you reach your goals.

Typically, this service is provided by an independent financial planner who will structure your portfolio based around your circumstances and objectives.  This is to help ensure that your money is being managed tax effectively and in line with the investment risk you are prepared to take with your money.  An investment manager will then manage the underlying investments on a day to day basis ensuring they stay aligned to your risk profile while encouraging growth or preservation, depending on objectives and risk appetite. Our top tips for a brighter financial future also covers some of the key things to think about when financial planning.

Benefits of asset management

Some people may approach an asset management firm with a set objective in mind, for instance, planning for retirement, whereas others may feel that their finances need a bit of a ‘spring clean’.  Generally, asset management services can be used to:

• Create wealth. Creating a sound financial foundation and investing within a risk profile suited to you, assists you to grow and/or preserve the capital value of your money whilst accessing a wide range of financial solutions. Many people don’t have an in-depth understanding of finances so a financial adviser can structure your portfolio using a variety of ‘wrappers’ including ISAs, pensions, investment funds, bonds, etc. tailored to your tax position and appetite for risk.
• Be Tax Efficient. Tax legislation is forever changing, but there are useful allowances available to help you make the most of your money.  Financial advisors and investment managers can ensure that these allowances are used effectively, helping you manage your money in a tax efficient way.
• Protect your future. Financial planners can help you plan for tomorrow as well as today.  It’s important to ensure that you have adequate protection in place to take care of yourself and/or your family should something happen to you which limits your ability to work or you pass away unexpectedly.  A financial planner can help you quantify your needs in this area and put something in place to ensure that cover is provided when you need it.
• Plan & take your retirement. Nowadays, retirement planning is essential with the ability for the state to provide support in the future in question.  Financial planners can help you set up a pension and guide you on how much you should be saving in order to be able to live comfortably in retirement.  Investment managers will manage the investments within the pension and suggest changes when markets and global economies change.
• Prepare your estate. Inheritance tax at a rate of 40% can be a big concern for individuals who want to pass on wealth to their families when they die. Financial planners can help you mitigate this through the use of gifting allowances, trusts and or investments which offer some inheritance tax relief.

What is investment management?

For many of us, the idea of managing our own investments is a daunting task and few may feel confident enough to make decisions about where we should put our money and when.  Investment managers are here to help! They can manage an array of investments for you and take the stress out of something you may have little knowledge or interest in.

Investment managers manage funds, equities, bonds and other investment vehicles on a client’s behalf to help them meet their goals.  They offer specific recommendations to help investors make the most of their money based on their attitude to risk and overall objectives.

Common investment management objectives

While investment management goals are always individual, common objectives include:

• Growing or preserving the capital value of your money
• Receiving an income
• Reducing your tax

While these different goals may require different investment strategies, your financial advisor and investment manager can work with you to help you prioritise your different objectives and put something suitable in place.

An investment manager can created tailored portfolios based on clients’ requirements, attitude to risk and current market conditions to try and meet these goals.  They use extensive research to identify buying opportunities and keep portfolios under constant review.   You can expect to receive clear reports from your investment manager detailing how your investments have performed and any changes which have been made.

Why work with an investment manager?

Working with a professional investment manager provides many benefits. Investment management services can help you:

• Invest with confidence. An investment manager can either help you make decisions regarding the investments within your portfolio (an advisory service) or you can grant them discretion to make the decisions on your behalf (a discretionary service).  Either way, they will report regularly and will be able to answer any queries you may have.
• Create a personal portfolio. Your portfolio should be tailored to meet your unique goals, risk appetite and preferences. A financial planner will work with you to understand your exact requirements, situation and goals and then liaise with the investment manager who will create an investment portfolio to help achieve your objectives. Their proposed approach will consider factors like how long you want to invest, your attitude to risk, whether you want an income, and other finances outside your portfolio.
• Mitigate Risk & Achieve Results. Once your portfolio strategy is agreed, your investment manager will set it up and monitor, rebalance and capitalise on new opportunities to help you stay on track to meet your goals and navigate tricky market conditions.

It can feel a big step to get in touch with an asset management firm for the first time and you may not know what to expect.  However, at Anderson Strathern Asset Management (ASAM) we genuinely pride ourselves on our financial and investment advice and enjoy working with first time investors just as much as those who are more experienced.  We enjoy creating relationships with our clients centred around trust and taking them step by step through the financial advice and investment process.