Financial Asset Management

Are you interested in learning about financial asset management? If you’re an investor thinking to invest over $5 million in liquid assets, then familiarizing yourself with the different types of financial asset management is a great starting point to your journey in investing. Understanding how financial asset management works and its impact on your investment portfolio can hold critical implications for your success. You can learn more by requesting a copy of our book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.

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The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

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Table of Contents

What Are Financial Assets?
What are the 3 types of Financial Assets?
What Are Some Examples of Financial Assets?
How Can You Get Started with Financial Asset Management?
How Much Does Asset Management Cost?
How Asset Management Companies Work

Pillar Wealth Management comprises a team of fiduciary advisors offering more than 60 years of combined experience. We can help you figure out how financial asset management works and how you can use it to grow your wealth. We offer financial asset management and wealth management services to high-net-worth clients with $5 million to $500 million in financial assets. Click here for a consultation, absolutely FREE of cost!

In this blog, we will discuss what are the three types of financial assets and what are some examples of financial assets? We will also go over other important questions like is a house a financial asset? And do you need a financial advisor for managing your financial assets? Let’s begin.

What Are Financial Assets?

Of course, the heart of financial asset management is the totality of the client’s financial assets. A financial asset is defined as a liquid asset. Its value is derived from an ownership claim or contractual right. To elaborate, there are basically 3 kinds of assets in general. These are:

• Real assets

• Financial assets

• Intangible assets

Real assets refer to physical assets such as a house, precious metals, land, building, and commodities. These assets have an intrinsic value drawn from substance or properties. Intangible assets are contracts, trademarks, copyrights, patents, and other forms of intellectual property.

A financial asset, as we mentioned, is a liquid asset. These assets do not really have any intrinsic physical worth. They usually don’t have a physical form, either. Instead, their value is derived from other facts such as:

• The supply and demand of the asset in the marketplace

• The degree of risk associated with them

• The expected rate of return on the asset

For instance, a highly valued financial asset would have a high demand in the marketplace, to which financial asset management can be applied. This would drive up its price and impact its intrinsic value. The opposite can also happen.

If you want to learn which other factors influence the value and performance of financial assets, talk to a wealth manager on our team! Given that a house is classified as a real asset, this should also answer your question, “Is a house a financial asset?”

What are the 4 types of financial assets?

The four main types of financial assets are: cash, stocks, bonds, and mutual funds.

What are the challenges in asset management?

Some challenges in asset management include: maximizing return on investment, managing risk, complying with regulations, attracting and retaining clients, and staying up-to-date with market trends and changes.

What are the 5 financial assets?

The 5 financial assets are: cash, stocks, bonds, mutual funds, and annuities. These assets can be traded or invested in to generate income and grow wealth.

What are the 5 categories of assets?

The 5 categories of assets are: current assets, long-term investments, property and equipment, intangible assets, and other assets. Current assets are those that can be converted into cash within one year, while long-term investments are held for more than one year. Property and equipment refers to physical assets used in a business, intangible assets are non-physical assets such as patents and trademarks, and other assets include items such as prepaid expenses.

What are the benefits of financial asset management?

Some benefits of financial asset management include: professional portfolio management, potentially higher returns, diversification of investments, and convenience. Professional portfolio management can help maximize returns and minimize risk, while diversification of investments can help spread risk and potentially increase stability.

Who should use financial asset management?

Financial asset management can be useful for a variety of individuals and organizations, including those who do not have the time or expertise to manage their own assets, those who want professional advice on how to allocate their assets, and those who want to diversify their investments. Financial asset management can be especially beneficial for those with a long-term investment horizon, such as retirement savers.

What are the main financial assets?

The main financial assets are cash, stocks, bonds, mutual funds, and annuities. These assets can be traded or invested in to generate income and grow wealth.

What are the two basic roles of financial assets?

The two basic roles of financial assets are: 1) to provide liquidity, meaning they can be easily bought or sold in the market, and 2) to provide a return on investment, either through interest payments, dividends, or appreciation in value. Financial assets can play a crucial role in helping individuals and organizations achieve their financial goals.

What is the safest of all financial assets?

It is difficult to determine the "safest" financial asset, as the level of risk can vary depending on an individual's personal financial situation and their tolerance for risk. Generally, assets such as cash and short-term government bonds are considered to be less risky, as they typically have a lower potential for loss of principal.

What are the 3 types of Financial Assets?

Now that you understand what assets are let’s take a look at another important question – what are the three types of financial assets?

Equities
Bonds
Cash and Cash Equivalents

1. Equities

When we discuss equities, we are referring to the stocks or shares in a company. Equities often play a large part in a financial asset management strategy. When you buy these stocks, you are essentially buying equities that represent your ownership in the company. Your shareholder’s equity here represents how much money the company would return to you if it liquidated all assets and paid all debts after liquidating those assets.

Buying equities thus makes you a partial owner of the company’s shares. Investors can earn money by investing in equities by:

• Earning dividend income – this is a portion of the company’s profits paid out to its shareholders periodically (usually at the end of the year).

• Capital appreciation – this refers to selling your shares to another bidder after their price has increased and earning a profit on your original investment amount.

Equities are volatile in nature and don’t normally have a fixed rate of return. There usually isn’t a guarantee that you will earn money through these financial assets. However, depending on your financial advisor’s financial asset management strategy and the type of shares you buy, you can still reduce this risk considerably to earn a high return.

To learn more, go through our guide and discover how you can improve your portfolio performance.

2. Bonds

Bonds are highly likely to be part of a financial asset management strategy. They are another major type of financial asset. They represent a loan that you make to the government or a corporate entity. The money is then used for building infrastructure, financing general operations, and other projects.

The issuer (the government or the corporate entity) makes periodic interest payments to the investor. These are usually made quarterly, semi-annually, annually, and so on. All bonds also have a maturity date that can vary between 3 or 4 months and go up to 30 years or more. Once the bond matures, the issuer will return the principal amount (the face value of the bond) to the investor. Therefore, when you invest in this financial asset, you can earn money via the interest payments issued and the principal amount returned to you.

Bonds are highly secure, low-risk investments. Government bonds, in particular, have a very low default rate. Corporate bonds are slightly riskier in comparison. If the company that issues these bonds goes bankrupt, it will no longer make interest payments to investors. It may also fail to return the principal amount of the bond. To account for this risk, corporate bonds typically have a higher rate of return than government bonds.

3. Cash and Cash Equivalents

The final category among the 3 most common types of financial assets is cash and cash equivalents. Cash and cash equivalents refer to the total cash present in your investment portfolio and play a major role in any financial asset management strategy. Cash equivalents are the investment securities in your portfolio that are highly liquid. They also possess high credit quality. These financial assets have a low-risk and low-return profile.

What Is Financial Asset Management?

Financial asset management refers to managing an investor’s financial assets on their behalf. It is an ongoing process that can be broken into 2 parts.

1. Appreciating the value of the investor’s assets over the investment period

2. Mitigating and controlling the risk associated with these assets

A financial asset management firm would be primarily responsible for making important decisions that determine which financial assets they should buy, which they should avoid, and which they should sell to increase the value of a client’s investment portfolio.

To learn more about how financial asset management works, we recommend ordering a free hardcover copy of Pillar Wealth Management’s book, The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies for Families, Worth $25 million to $500 million.

What Are Some Examples of Financial Assets?

We have already discussed the 3 main types of financial assets utilized in financial asset management. However, these can be further broken down into other examples. Knowing what are some examples of financial assets can better prepare you for a meeting with your prospective financial advisor.

Examples of Equities/Stocks
Examples of Bonds
Examples of Cash and Cash Equivalents

1. Examples of Equities/Stocks

There are several types of stocks that investors can consider. These are:

Blue-chip Stocks

Blue-chip stocks belong to established companies having a history of profitability over the last 10 years or so. They also make regular dividend payouts to their stockholders. These stocks are a lot less volatile. They belong to companies capable of sustaining operations during periods of recession. Investors can buy and hold these stocks and earn income in the form of dividends.

Penny Stocks

Penny stocks belong to small public companies. They usually trade for less than $5 per share. These stocks are highly volatile, and their price can easily increase and decrease in response to economic conditions. Investors can earn high returns by trading these stocks when their price appreciates. However, they also run the risk of facing significant losses if the price drops.

To learn more about investing in equities, please request a copy of our book, 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.

2. Examples of Bonds

Treasury Bonds

Treasury bonds are government debt securities. The US federal government issues these securities. They have a maturity period that’s usually longer than 20 years. These bonds earn interest on a periodic basis until they mature. They have a fixed interest rate, and interest payments are made semi-annually.

Municipal Bonds

Municipal bonds are debt-based securities issued by a county, municipality, or state for financing capital expenditures. They can be used to construct highways, build schools, and improve the quality of life for residents.

These bonds are highly attractive to investors because they are exempt from federal taxes. Investors can also avoid paying most local and state taxes on these bonds.

Talk to us in a free session and learn about municipal bonds, treasury bonds, and other types of bonds.

3. Examples of Cash and Cash Equivalents

Treasury Bills

Treasury bills are government-issued securities. The United States Department of Treasury issues them to investors. They can have a value between $100 to $5 million. Investors cannot earn interest on treasury bills. However, they can get them at a discounted price and earn yield based on the price difference between when they purchased the bills and when they redeemed them.

Commercial Papers

Commercial papers are debt securities issued by large companies to attract investors. They are used to meet a company’s short-term expenses, such as paying employee salaries. The issuing company promises to pay the face value of the commercial paper on the maturity date.

Money Market Funds

Money market funds function like checking accounts. They pay a high interest using the money deposited in these funds. They are usually used by companies and organizations for managing their money. The share price of these funds is $1 per share.

Marketable Securities

Marketable securities are a type of financial asset that is very liquid and can get converted into cash easily. Their maturity date is less than a year. You can buy and sell them on a public bond exchange or public stock exchange.

Short-term Government Bonds

Short-term government bonds also qualify under cash equivalents. They are issued by the government for funding government projects. These bonds have a maturity date of up to 5 years. They are low-risk securities with a low return.

How Can You Get Started with Financial Asset Management?

If you want to invest $5 million to $500 million in liquid assets, then the sooner you start, the better. Getting a financial advisor is essential here. Pillar Wealth Management offers comprehensive financial asset management to investors that can help grow their portfolio sustainably. Here are some things we can help you out with:

Designing Your Portfolio
Managing Risks
Paying Taxes
Achieving Your Financial Goals

1. Designing Your Portfolio

With over 60 years of experience in financial investment management, the experts at Pillar Wealth Management can help you design an investment portfolio that complements your financial goals. We can help you determine how to allocate your assets and what percentage of stocks, cash, and bonds you should have in your portfolio.

2. Managing Risks

Financial asset management includes helping all types of investors manage their risks within acceptable levels. Our team can offer tailored solutions on how you can control your portfolio risk. We utilize historical data, an Efficient Frontier, and conduct portfolio stress tests for this. We can help you monitor your portfolio risk at all times and adjust it to control your losses.

3. Paying Taxes

Financial asset management includes managing taxes on your financial assets to achieve long-term financial success. Pillar Wealth Management has a team of experts that can help you minimize and control your taxes to maximize your returns. We can help you balance your short-term and long-term capital gains, invest in tax-exempt securities, and utilize other tax shelters.

4. Achieving Your Financial Goals

Utilizing the best strategies is important for proper financial asset management. However, if you are not achieving what you aimed for, then it is all for naught. Pillar Wealth Management tailors all of its financial asset management strategies to focus on goal achievement. We have a highly robust system in place that allows us to:

• Understand your goals

• Recommend tailored strategies that help achieve your goals

• Execute approved strategies aiming for maximum efficiency and effectiveness

• Monitor the performance of strategies and track your progress

• Adjust strategies to remove redundancies and stay on track for achieving your financial objectives

Ultimately, we focus on financial serenity. We don’t push you to take unnecessary risks and seek to offer solutions that deliver value. To learn about financial serenity, go through our guide on critical shifts investors need to make to achieve their goals.

How Much Does Asset Management Cost?

Asset management refers to the professional management of various types of assets, such as stocks, bonds, and real estate, on behalf of clients. The cost of asset management can vary depending on the specific services provided and the amount of assets being managed.

Generally, asset management firms charge a percentage of the assets they manage as a fee. This fee is often referred to as an “asset under management” (AUM) fee. For example, if a firm charges a 1% AUM fee and manages $100,000 in assets, the fee for asset management would be $1,000 per year.

In addition to the AUM fee, asset management firms may also charge other fees, such as transaction fees for buying and selling securities, and account maintenance fees. Some firms may charge a flat fee for their services rather than a percentage of assets.

The cost of asset management can also vary depending on the type of assets being managed. For example, managing a portfolio of stocks may be less expensive than managing a portfolio of real estate assets.

In general, it is important for investors to carefully consider the fees associated with asset management when choosing a firm to work with. While higher fees do not necessarily equate to better performance, it is important to find a balance between cost and the level of service and expertise provided by the firm.

How Asset Management Companies Work

Asset management companies are financial services firms that manage the investments of their clients. They offer a wide range of services, including portfolio management, financial analysis, and risk assessment.

There are two main types of asset management companies: those that manage the assets of individual investors, and those that manage the assets of institutions such as pension funds, endowments, and foundations.

Individual investors typically work with asset management firms by opening an account and transferring their assets to the firm to be managed. The investor then works with a financial advisor to set investment goals and determine an appropriate investment strategy. The asset management company uses this information to select a portfolio of investments that align with the investor’s goals and risk tolerance.

Institutional investors, on the other hand, typically have a team of in-house investment professionals who work with the asset management firm to develop an investment strategy and select investments. The asset management firm may also be responsible for the day-to-day management of the investments and providing regular reports to the institutional investor.

Asset management firms generate revenue by charging fees for their services. These fees may be based on a percentage of the assets under management, a flat fee, or a combination of both.

Overall, the goal of an asset management company is to help its clients grow their wealth and achieve their financial goals through effective investment management.

Wrapping It Up

If you are ready to invest $5 million to $500 million in liquid assets, book a free consultation with our team today! We can help you with financial asset management, lowering your costs, controlling your risk, and optimizing your returns. Talk to Pillar Wealth Management in a free session!

Authors

Hutch Ashoo

Chris Snyder

To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.