Investopedia defines Asset Management as “the direction of all or part of a client’s portfolio by a financial services institution, usually an investment bank, or an individual. Institutions offer investment services along with a wide range of traditional and alternative product offerings that might not be available to the average investor”. In layman terms, asset management means the process of managing the investment on someone else’s behalf. Taking help from Investopedia again, this is a process where “a dual mandate is implemented”. This means that the aims are twofold – increase the value of a client’s assets over a period of time, and mitigate any risks of investment. An asset manager, therefore, is responsible for making the decision of which investment opportunities to explore and take, that will best serve these aims.
The process of asset management:
The asset management BPO services involve rigorous research involving statistical analyses and with both micro and macro-economic tools. Prevalent market trends are considered and future trends are predicted to evaluate the potential trajectory of an asset’s value. These assets can include several forms of investment, ranging from real estate and equity to mutual funds. Usually, asset management is such a costly process that most companies offering them have an investment minimum. This means that they only offer you their expert advice if you are investing a said minimum amount, which needless to say is considerable. This limits the choice of asset management service only for high net-worth individuals, big corporations, governments, or other financial institutions handling money from several investors.
Why is outsourcing better with asset management?
Now let’s move to why it is better to outsource these services. For starters, there is the most obvious reason – cost. As has already been mentioned, if your investments are not very huge, to begin with, there will be fewer options for you to choose from, and even then they will come at a high cost. Instead, choose an outsourcing company to take care of your asset management options instead of a purely financial institution. BPO companies also remove the third party interferences, such as the organizations that financial institutions have on board for research or interviewing company officials of the investment options in concern. This will be another block of your costs slashed down just by choosing a different company to handle your investments.
The expertise you require is different
Here again, if you think that choosing those asset managers who deal with millions and billions will be good for you, might not be the best idea. Some investments only start to pay after they have crossed a threshold of risk. To elaborate further, let’s say that an investor puts a lot of money in equity stocks but those stocks lose value in one business cycle. The mere number of shares this investor owns will get them high enough dividends as well as the capability to hold their investments until the stock value recovers. Same cannot be said for someone who only buys a handful of shares and loses immensely when the stock value goes down. Therefore, BPO companies, which are more proficient in dealing with several sizes of investments, will be your better bet to minimize risks and maximize returns.
Disaster recovery and cushions of any unforeseen downturn
Continuing with the previous point on how BPO companies are more excelled in handling the investments by their sizes, it is also logical that they are more prepared for handling risks since smaller investments need to be handled with more scrutiny. At the same time, there are extra measures taken by BPO companies offering asset management services, such as insurance, document management, as well as clearer communication. You also have more say in defining your objectives with a BPO as compared to a bigger financial institution.
There is something extra with BPO companies
When you are moving towards asset management, initially you not only need certainty that your investments will be protected but also need to learn the ins and outs of this type of investment. This means that there is a lot of measuring, evaluating, and reporting required from your managers’ end. This is where a smaller BPO company is your better choice than a multinational financial institution. There are also different packages available for family investments, trust companies, as well as private wealth management depending on your needs, be them business or personal. All in all, an outsourcing company is a better fit for small and medium asset management services, be it from the factors of communication, convenience, and comfort, or from the angles of skill, expertise, and trust.