The Role Asset Management Plays in Personal Finance

You’ve heard the saying, “Rome wasn’t built in a day” — and the same can be said for a financial portfolio. Accumulating wealth takes time, not to mention strategy and informed decision making.

When it comes to building your personal portfolio, finding the right way to manage your finances is a key.

Assets vs Liabilities

To get an accurate snapshot of your personal finance today, you must consider two categories.

First, consider everything that adds financial value to your life. These are your assets. They include your home or any other property you own, your investments, and your savings, along with various other valuable items or intangible assets.

On the other hand, you must factor in what you owe. These are your liabilities. They may include mortgages, student loans, outstanding debts, taxes, and bills. Most people have liabilities.  Managing your finances well can make all the difference in a successful long-term financial plan.

What is Asset Management?

Asset management is the process of building wealth over time by executing an investment plan. This will include acquiring new assets, maintaining them in your portfolio, and selling them as needed.

Asset managers can help take care of an individual’s portfolio.  They help individuals build an investment strategy that works for their particular needs and goals. If you are unsure about managing your investment portfolio, you may want to consider hiring a professional to help you with managing your assets.

3 Common Types of Financial Professionals

1. Investment Brokers

Broker dealers and registered representatives trade stocks and securities for their clients. Most brokers are paid by commission, and they may not have a fiduciary responsibility to their clients.

For this reason, it’s important to research a brokerage thoroughly, asking questions about fiduciary obligation, investment offerings, and commissions before hiring one to manage your portfolio.

2. Robo-Advisors

In the internet age, investment advice can be obtained from modern technology, such as AI-powered investment tools. These virtual tools use computer programs (algorithms) to invest and allocate a client’s portfolio based on an investor’s selected risk tolerances and program inputs.

These services are often more affordable than personalized services, but they are limited to the configurations of their technology, not necessarily an individual’s specific needs.

3. Investment Advisors

While brokers tend to provide transaction-based advice and robo-advisers tend to provide programed advice, investment advisors provide management of the broader portfolio and can tailor services to the specific needs of an individual investor.

Investment advisors advise on your long-term investment plan, as well as portfolio strategies. They may also offer financial planning support with specific topics such as household budgeting, tax planning, retirement planning, or estate planning.

Registered investment advisers have a fiduciary duty to their clients.  Not all financial professionals are fiduciaries to their clients, so it’s important to ask before investing with a financial professional.

How Much Does Asset Management Cost?

The cost of managing your assets depends entirely on who you use to manage your assets. Some financial professionals provide services on commissions.  This is typically received through broker dealers.  This means they are compensated primarily on asset transactions. 

Some financial professionals, in addition to providing services to clients, are also paid by the investments they recommend.  When they recommend certain investments, the investment sponsor compensates them.  This means they could push products or services to you for their own benefit, rather than because it’s your best investment option.

Other financial professionals provide services for a fee.  The fee may be a flat rate, hourly rate, or a percentage of the managed assets.  Instead of being paid on the transaction or the investment sponsor, the professional is paid on the service regardless of when or what investments are in your portfolio. 

A financial professional could be compensated in one or all of the ways mentioned above.  It is important in your evaluation of a financial professional to know how they will be compensated for providing their services.  

The Asset Managing Process

Asset managers are tasked with building your wealth while mitigating your risk. As you know, all investments carry some level of risk[1] , but financial professionals can help you create a suitable path forward. By avoiding unnecessary pitfalls and investing strategically, you can improve the ability of your portfolio to grow and its potential for long-term financial success.

When you work with an asset manager, you’ll typically follow a process like this:

1.   Identify your assets.

In your initial meeting, your asset manager will take a look at your current assets, liabilities, and goals to gain an accurate picture of your current situation.

2.   Create a plan.

With your current financial position, future goals, and risk tolerance in mind, your asset manager will create an investment plan. Typically, your plan will include investments that seek the most favorable return while maintaining an appropriate amount of risk.

Some clients are willing to risk more for lucrative returns, while others would prefer slow and steady accumulation. Your preference will determine your asset allocation and investment strategy.

3.   Maintain your portfolio.

Once your assets have been allocated, your asset manager will manage them over time to monitor progress toward your preferred outcomes.

Some investments are only worthwhile for a certain period of time, so your asset manager may trade them for you as needed. They will also analyze market trends, industry forecasts, and economic conditions to determine your favorable strategies.

No financial manager can predict the future, but they have experience and a wide array of tools at their disposal to help guide you. They will review their findings with you, typically in an annual meeting, offering insights into your portfolio and advising you about upcoming opportunities or risks to keep in mind. 

A Financial Partner For Life

Building wealth is a process that should not be taken lightly. You want to choose an asset manager who has investment experience and expertise — and, just as importantly, one who will work with your best interests in mind.

At Marietta Wealth, our team of financial advisors is here to help you pursue your investment goals. As a fee-only investment firm, we’re committed to our fiduciary duty and love to see our clients build wealth and find financial freedom over time. We can provide asset management through our investment services or serve as personal financial advisors that help you prepare well for the years ahead.

If you seek confidence in your investment plan and desire to reach your financial goals, reach out to us at Marietta Wealth today to get started.

The information provided is for informational purposes only.  It is not intended to be used, and should not be used, as the sole basis for legal and/or tax advice.  Individuals should seek and rely upon the guidance and advice of their own legal and tax counsel before making any decisions regarding any planning, investment, tax concepts or strategies discussed herein.  Individual circumstances may vary and results discussed are no guarantees of applicability or future performance.

Marietta Wealth is a registered investment adviser.  Registration of an investment adviser does not imply any level of skill or training.  For additional information about Marietta Wealth’s financial planning and advisory services, please see the Marietta Wealth Disclosure Brochure or ADV Part 2A for full details, which is available upon request or by visiting our website. 

Certain of our representatives are Certified Public Accountants with the accounting firm Ben H. Crowe, C.P.A., LLC which is affiliated with Marietta Wealth Management. To the extent that these representatives provide accounting services, which may include tax advice, to any clients, including our advisory clients, all such services shall be performed by those representatives, in their individual professional capacities, independent of our advisory firm, for which services we shall not receive any portion of the fees charged by the representative, referral or otherwise. It is expected that these representatives, solely incidental to their practices as accountants, recommend our advisory services to certain of their clients. No client of Marietta Wealth Management is under any obligation to use the accounting services of these representatives. Our Chief Compliance Officer remains available to address any questions that a client or prospective client may have regarding this potential conflict of interest.

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