Why Financial Asset Management is Important

Posted by on Dec 30, 2014 in Blog | Comments Off

Why Financial Asset Management is Important

Financial asset management goes beyond balancing the company’s books at the end of the tax year. It is applicable to a variety of clients from SMEs, global corporations, banks and groups of potential investors. The process involves entrusting tangible and intangible assets over to a qualified asset manager, like Jezri Mohideen who can advise clients on the best way to invest that money into a potentially profitable vehicle. Before any further investment can begin, it is down to the asset manager to accurately assess the value of a client’s net worth and from there, advise them on how to expand their portfolio.

Asset management in the UK is big business – the City of London has provided a veritable feeding ground for asset managers and the growth of the industry has helped to boost the country’s economy as a whole. The sheer volume of assets managed by companies in this country amount to £5.4 trillion, an enormous amount of money, with over a third of that belonging to overseas clients. Because of the international interest in the way assets are controlled in London, this has placed the capital as one of the top places in the world to expand investments.

Part of the success of asset management, in the UK at least, is derived from the rise and fall of investment banks in the last two decades. Where investment banks had failed, asset management companies are picking up the pieces and are successfully growing the investments from their clients. Although some inequality exists between public and private capital returns, the Bank of England’s chief economist has provided a tentative prediction that as a nation the UK is entering the ‘age of asset management’.

Elsewhere, asset managers have not had the same level of respect as garnered by British firms. In a conference in Washington earlier this year, four asset managers from some of the biggest companies defended their position as being a viable alternative to investment banks and certainly should not be blamed in the same way for the financial crash in 2008. During the May conference, these asset managers highlighted one of the key differences of the ways they conduct business over investment banks, not only are they not leveraged, but asset management companies do not receive public bailouts.

In the Jezri Mohideen slides it is clearly indicated just how disparate the practices of investment banking and financial asset management are. Part of the problem of the Lehman Brothers’ fall and the subsequent financial difficulties experienced the world over was that in order to prop up these giant multinational banks, the public had to put their hand in their pockets. There is, with any kind of investment, an element of risk and financial asset management is no difference, but the significance of the rise of asset management is that should the venture not pay off, the knock-on effect is going to be a lot smaller than when an investment bank fails.

In addition to supporting the economy and boosting international asset management, this form of investment is shortly going to play a prominent role in the way pensions are handled. Already the government has used investment vehicles for pensions, to ensure that pensioners receive the money they are entitled to, but the new pension reforms will mean pensioners will have far greater freedom as to how they spend it themselves. From April 2015, pensioners can choose to either withdraw the entirety of their entitled pension in one go, or continue to receive their pension in instalments.

The government has been warning those who might be tempted to withdraw their pensions to spend it wisely and not waste it, encouraging them to invest the sum intelligently. Financial asset managers therefore are going to play an important part once the reforms come into force from next April, as they will be able to provide impartial advice to these pensioners and potential clients. High net worth individuals are something of a speciality for asset managers, as they can provide investment vehicles that are unique to this category of client.

Jezri Mohideen

Having enough money going into retirement age is a concern for many people, and by having a reliable asset manager who has proven to grow clients’ portfolios is only going to be beneficial to not just those pensioners who would rather look after their pension themselves, but also the economy. Perhaps some of these retirees will go on to invest via a platform, which is another growing aspect of asset management that is currently presenting new opportunities for fund managers.

In just four years, the retail market share for platforms has increased from 36.6% to 55.6%, a rapid expansion that was once hailed as a threat to asset management but is now being embraced by the biggest firms. It is now more important than ever for fund managers to expand with this new version of retail investment, in order to not just survive but to continue successfully delivering their expected return on investment. These are but a few examples that demonstrate the significance of financial asset management.

London has become one of the biggest cities for international asset control, owing to a huge turnover in the City as well as the UK as a whole and pensioners are going to benefit greatly from having that option to invest their pension in its entirety.

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