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An asset management company helps you invest your money professionally. Instead of managing your investments yourself, you let experts do it for you. Many people still believe that you need to be very wealthy to work with an asset management company. That might have been true in the past, but today, these services are available to a much wider range of people.
Before investing, you and the asset management company will sit down to decide how much risk you’re comfortable with, what kind of return you’re aiming for, what the costs are, and any other conditions. Based on these agreements, the company starts investing your money with the goal of reaching your financial goals in a responsible way.
In this article, we explain when working with an asset management company makes sense, and we go over the main pros and cons.
Want to know what’s right for you? Schedule a free consultation with one of our experts.
What is an asset management company?
An asset management company is a professional organization licensed to manage and invest money on behalf of others. Essentially, their main activity is investing client funds with the goal of achieving the best possible return.
In Belgium, there are roughly two types of asset management providers:
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Banks & insurance companies
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Independent asset management firms
The key difference is that banks and insurers usually offer more than just asset management. In addition to managing assets, they may provide services like mortgages, loans, checking and savings accounts, and insurance products. Independent asset management companies, on the other hand, focus solely on managing investments.
What does an asset management company do?
The main job of an asset management company is to invest your money in a responsible way to help you reach your financial goals. But before they start investing, there’s an important intake process:
1. Intake meeting
Before investing begins, the asset manager will first get to know the client’s goals and preferences. They’ll also assess the client’s financial situation and work together to determine how much risk can and should be taken. This results in a personalized risk profile.
2. Opening an investment account
An investment account is opened in the client’s name. The asset management company receives authorization to invest using this account.
3. Investing the money
Once the client transfers funds to the account, the asset manager begins investing. They choose suitable investment products (such as stocks and bonds), monitor the markets, and adjust the portfolio by buying or selling assets when necessary.
4. Ongoing monitoring
The asset manager regularly checks whether the investments still match the client’s personal situation and whether their financial goals remain achievable.
5. Reporting
The client receives periodic reports with updates on investment performance and the strategies being followed.
Who regulates asset management companies?
In the Netherlands, asset management companies are supervised by the AFM (Authority for the Financial Markets) and DNB (De Nederlandsche Bank). Additionally, the Dutch Securities Institute (DSI) maintains a registry of certified and registered asset managers and financial professionals.
Axento is a Dutch asset management company. Because we are supervised by the AFM, we are also authorized to provide our services in Belgium under the European passporting rules (MiFID II), which allow licensed firms to operate across the EU.
You can check whether an asset management company is properly licensed and has qualified staff by visiting the AFM and DSI websites.
Advantages of using an asset management company
There are several compelling reasons why people choose to work with an asset management company:
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Professional Expertise: If you want to invest but lack the time, knowledge, or experience, an asset manager can be a smart solution. They typically have in-depth market knowledge and can invest cost-effectively thanks to their scale.
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Time-Saving: Letting a professional manage your investments frees up your time so you can focus on other things.
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Agreed Risk Level: An asset manager is not allowed to take more risk than what was agreed upon with you. That means you don’t have to worry about them taking irresponsible risks with your money.
Disadvantages of using an asset management company
While there are many advantages, working with an asset management company also has some downsides to consider:
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Management Fees: Asset managers charge a management fee. This means that costs are usually higher than if you manage your own investments directly on the stock market.
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Limited Control: As an investor, you don’t always have direct influence over the timing or type of investment decisions. However, all decisions made by the asset management company will fall within the agreed investment strategy and risk profile.
What are the costs of an asset management company?
The costs of working with an asset management company vary depending on the provider. The main expense is the management fee, which is usually a percentage of the assets under management.
Other possible costs include:
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Custodian Fees: Fees paid to the bank or institution that holds your investment account.
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Transaction Costs: Costs incurred when buying or selling investments.
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Fund Fees: If your money is invested in mutual funds or ETFs, you pay fund management costs.
Some asset management companies prefer to invest in individual stocks instead of funds. In that case, you won’t pay fund fees, but transaction costs are typically higher.
What is the minimum investment amount?
The minimum amount required to start investing depends on the asset management company:
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Traditional asset management companies often require a minimum investment of over € 100.000.
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At Axento, you can start investing from just € 7.500.
Thinking about making the switch from saving to investing?
If you're currently saving and considering investing, download our information brochure or get in touch for a free, no-obligation consultation with one of our experts.
