Understanding asset management starts with defining the word “asset.” In the broadest sense, an asset is anything that delivers value to its owner and the stakeholder(s) it serves. Stocks, bonds, residential properties, and commercial office buildings are all examples of assets.
In finance, asset management describes managing money on clients’ behalf. The financial institutions managing the money are called asset managers, and they develop and execute investment strategies that create value for their clients. Broadly, this process involves “putting money to work” by buying, holding, and selling financial assets with the potential to achieve a client’s investment goals. Examples of financial assets include stocks, bonds, commodities, shares in private funds, and more.
Most importantly, asset management firms are “fiduciaries.” This means that, unlike other parts of the financial services industry, asset management clients provide full trading authority — also known as “discretion” — of their funds to their asset manager. In turn, asset managers are legally required to act in their client’s best interests.
Asset management firms manage and invest funds for large institutional clients, like global corporations, sovereign wealth funds, and not-for-profit organizations.
Wealth management firms offer financial and investment advisory services to high-net-worth individuals and families.
Large national banks will typically offer both lines of business, and the client base is what segments the fiduciary part of the business.
What Is the Difference Between Asset Management and Wealth Management?
Asset management is the business wherein a financial institution manages money on behalf of institutions, sovereign wealth funds, pension funds, corporations, and other large groups. These clients are often called institutional investors, and the asset manager, in turn, is called an institutional asset manager. Client funds are invested in financial assets like mutual funds, ETFs, individual stocks and bonds, hedge funds, private equity, and more.
Wealth management is essentially asset management where the client is an individual or family. It is all this, plus understanding an individual or family’s entire balance sheet, cash flows, budgets, goals, and other detailed elements of their financial situation. This can include terms of employment, funds held in trust or holding companies, insurance needs, and charitable giving.
In addition, wealth management firms also offer clients private banking services, which provide them with tailored 1-to-1 advice on retail banking products and services, such as mortgages and loans.
Overall, wealth management is a service that aims to help someone with their entire financial life — both assets and liabilities — whether in financial planning, gifting, or building the legacies they want to leave for their families.
Largest Asset Management and Wealth Management Firms
You might recognize the names of the largest asset management firms in the world as they are also some of the world’s largest financial institutions overall. The top five asset management firms globally are:
Vanguard Group (USA)
Fidelity Investments (USA)
State Street Global Advisors (USA)
Morgan Stanley (USA) Source: Refinitiv as of March 31, 2022
When it comes to the world’s largest wealth management firms, you will see some overlap with the top asset managers list because global banks typically have both asset management and wealth management lines of business to serve both their institutional and individual consumer bases. Morgan Stanley is a good example of this. The top five wealth management firms globally are:
UBS Global Wealth Management (Switzerland)
Edward Jones (USA)
Credit Suisse (Switzerland)
Morgan Stanley Wealth Management (USA)
Bank of America Global Wealth & Investment Management (USA) Source: Adv Ratings as of June 1, 2020