External asset management (EAM) refers to the practice where independent professionals or firms manage investment portfolios on behalf of clients without holding custody of the assets. Instead, assets are maintained in the client’s name with a custodian bank, while the EAM provides investment advice and portfolio management services. This model offers clients personalized financial strategies and access to a broader range of investment products, often with greater flexibility than traditional banks. Learn more.
The Key Characteristics of External Asset Management
External asset management is characterized by three main traits that define such services. What are they? Take a look below.
- Independence—external asset managers (EAMs) operate independently from banks, allowing them to offer unbiased advice and access to a wide array of financial products.
- Client-centric services—external asset management is dedicated to providing tailored investment solutions, focusing on the unique financial goals and risk profiles of each client.
- Custody arrangements—while EAMs oversee investments, the actual assets are held by custodian banks, ensuring security and transparency.
What Services Does External Asset Management Include?
EAM isn’t a single service. Instead, it’s a set of wealth-management-related operations and services executed by a single firm. What can you expect from such services? Namely:
Portfolio Management
Developing and implementing investment strategies aligned with clients’ objectives. EAMs use wealth management platforms to consolidate customer data into a single overview and manage client portfolios from one place, maximizing profits and adhering to a given client’s risk tolerance.
Financial Planning
External asset management also includes financial planning in the form of:
- tax optimization,
- estate planning,
- retirement planning,
- and many more.
Investment Advisory
Finally, external asset managers provide their clients with professional advice on investment opportunities and strategies. They don’t only execute; they also provide expert guidance based on their knowledge and experience.
The Benefits of External Asset Management
Naturally, external asset management comes with multiple benefits for investors. What are the specific advantages?
Personalized Attention
EAMs prioritize understanding each client’s unique financial goals, risk tolerance, and investment preferences. This individualized approach enables the development of customized investment strategies that align with the client’s specific objectives. By focusing on the client’s needs, EAMs can provide tailored advice and solutions, fostering a more intimate and responsive client-advisor relationship.
Access to Diverse Products
Due to their independence from traditional financial institutions, EAMs can offer a broader spectrum of investment options, including alternative investments such as private equity, hedge funds, and real estate. They aren’t limited to the options provided by their institution, and they have more diverse talent on board to find you the best investment opportunities in different fields and among various asset types.
The Takeaway
In summary, external asset management is an effective way to gain access to personalized wealth management services unbound by any financial institution. As such, it is commonly chosen by those who want to maintain and multiply their wealth as the most reliable and effective service on the market.
