What Is Asset Management? Definition & Importance (2023)

7 Min. Read

August 31, 2021

What Is Asset Management? Definition & Importance (1)

You know what assets you’ve got in your business. And you already know it’s part of your financial reporting obligations. Successful asset management starts right here. See, you’re already doing it!

As your business grows, it may become prudent to start making that additional money work for you through investments. You can do this either as an individual or business. The financial term for doing this is ‘asset management’ and you can either do it yourself, employ investment services or use asset management software.

Here’s What We’ll Cover:

What Is an Asset?

What Is Asset Management?

Asset Management Services Companies

Digital Asset Management Systems

Goals of Asset Management

(Video) What is Asset management? Importance of Asset management | Asset management softwares.

Benefits of Asset Management

Creating an Asset Management Strategy

What Is an Asset?

Businesses usually have tangible and intangible assets. Tangible assets are actual physical things, like property, tools, equipment, land and vehicles. Intangible assets are things like intellectual property, software license agreements and databases. And you need to accurately record all your current and fixed assets on your balance sheet.

If you’re completely new to this, here’s a quick guide to help you identify all your assets and liabilities.

What Is Asset Management?

In the world of finance, asset management is when investment professionals run your investment portfolio. This means that they research and analyze the markets to mitigate risk, and take well-timed opportunities to make investments on behalf of their clients.

As Brian O’Connell writes in Forbes Advisor: “Asset management is the service of managing a client’s money. At its core, that means identifying a client’s financial goals and then working to accomplish those goals via portfolio management—buying and managing stocks, bonds and funds.”

Asset Management Services Companies

We’ve all heard the phrase, ‘You have to speculate to accumulate’. But few people are willing to risk their hard-earned cash without really knowing what they’re doing. If you’ve got the knowledge, that’s great. But most investors wisely employ experts to manage their assets professionally.

Companies that provide asset management services can have clients that are individuals, businesses, large corporations and other organizations. They aim to meet their clients’ financial goals through successful asset management.

Asset management companies usually charge for their services in 1 of 2 ways. Either with an individually agreed percentage of the investments’ return, or as a fixed minimum annual fee.

They usually have a minimum investment amount, which has previously limited them to working with high net-worth individuals and large corporations. Now there are 2 general types of asset management services companies:

(Video) What is Asset Management? Industry Overview and Career Options

Top-End Firms

These companies provide their investors with a bespoke service. They take a holistic view of their clients’ finances, including their necessary income, liquidity needs and tax position. Given the personal level of service, the preferences of the clients are paramount, including their ethical and moral standpoints. For example, clients can insist that their money is only invested in companies that are actively minimising their environmental impact.

Typically, they have a high minimum investment requirement. As their client, your asset management account comes with a personal financial advisor that handles your portfolio. These often become long-term relationships built on a high level of trust – some even span generations.

This type of asset management company can access a broad range of investment opportunities for their clients.

Specialist Companies for Average Investors

Some companies now specialize in more average investors who want to make smaller investments. They merge individuals’ investments into mutual funds and use a central investment portfolio to maximize your return.

Digital Asset Management Systems

Some businesses use asset management software or digital platforms to run their own internal procedures. This can be a great way to automate your asset tracking processes and keep all the information together in one place. The software’s algorithms then manage the contents of your portfolio.

Usually such digital tools also give you access to a third party, individual asset manager. So you can also talk to an actual human who’ll advise you on your particular situation.

Goals of Asset Management

Whether a company, or digital, the goals of asset management are the same:

  • Keep fixed and current assets accurately recorded: meeting your liabilities and giving you a clear picture of any inefficiencies.
  • Mitigate risk
  • Measure the asset lifecycle cost
  • Increase the rate of return
  • Grow your business by making more money

Benefits of Asset Management

There are 2 levels of asset management benefits you can achieve. The first is at business level, where there are several gains from having a tight rein on the assets in your company. The second is at the investment level, where the benefits of professional asset management services are defined.

Business Level Benefits of Asset Management

You meet your liability to accurately record the value of your business assets on your financial statements.

Tracking assets through their full life cycles highlights any areas of waste or ghost assets, leading to greater efficiency. Having this information in one place also improves future purchase decisions because you can easily see what you already have and avoid unnecessary expenditure.

(Video) Asset Management Definition | Learn With Finance Strategists

Reporting is made easier because all the current information you need to satisfy HMRC is collected and collated as you go.

Investment Level Benefits of Asset Management Services

It’s like anything, a professional is paid to use their expertise to your benefit. And that’s exactly what asset managers do. They use their skills and experience, alongside all the vast resources available to them, to meet your financial goals. And all within the risk boundaries you initially set together. Asset managers make autonomous decisions about your investments to get you the best rate of return. They do their job, while you get on with running your business.

Creating an Asset Management Strategy

At the moment, if your business is small, it may seem unnecessary to put too much time into effective asset management. But, as it’s already part of your financial reporting, it’s a good idea to decide how you’re going to do it now – before your amount of assets becomes more overwhelming.

You’ve got 3 main jobs to get started on your asset management strategy.

  1. Asset Inventory

You can’t organise something properly until you know exactly what it is. So you need to do a deep stock check and create a complete asset inventory. This means listing each asset’s details; when you got it, where it is and its current value.

  1. Asset Life Cycle Calculation

It’s not just the purchase price that’s involved here. You also need to know the whole costs for each asset for its entire, usable life-cycle. This includes any maintenance, service and disposal costs. Pay particular attention to items with a fast depreciation rate, like vehicles and IT equipment.

  1. What Are Your Aims?

This means setting your financial targets. If you intend to use asset management services, they’ll need to know the financial objectives they’re trying to achieve on your behalf. This is where you dig into how to make money while mitigating the unavoidable risks, and come up with a financial plan.

Whatever size your business currently is, you’re likely to be doing most of the first 2 tasks as part of your usual business admin. It’s exciting to plan how you can use your assets in an investment capacity, as your business continues to grow. And it never hurts to get the thinking done in advance even if you’re not quite ready. Asset management planning should dovetail beautifully with your business’s existing financial plans – with everything working together towards clear goals.


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(Video) What is Asset Management?


What is asset management and why is IT important? ›

Asset management is simply a system that helps companies keep track of all their assets, such as vehicles, equipment, and investments. Keeping tabs on the assets helps streamline operations, especially in relation to their sale or disposal.

What is asset management simple definition? ›

Asset Management Definition

Asset management is the service of managing a client's money. At its core, that means identifying a client's financial goals and then working to accomplish those goals via portfolio management—buying and managing stocks, bonds and funds.

WHY IT asset management is important now? ›

IT asset management is an essential part of business success. It combines financial, inventory, and contractual functions within the business in one place to help promote strategic decision-making when it comes to using and distributing IT-related materials among employees.

What are the 3 main asset management types? ›

What Are the Most Popular Asset Classes? Historically, the three main asset classes have been equities (stocks), fixed income (bonds), and cash equivalent or money market instruments.

What are the 4 types of assets? ›

The four main types of assets are: short-term assets, financial investments, fixed assets, and intangible assets.

Why is asset management important what is its purpose in a school? ›

Asset management can help school managers to understand the lifecycle of their educational assets, from purchase, or lease, right through to disposal. It also helps make auditing and reporting more straightforward.

What is asset management example? ›

Fixed assets, equity (equity investments, equity-linked savings schemes), real estate, commodities (gold, silver, bronze), cash and cash equivalents, derivatives (equity, bonds, debt), and alternative investments such as hedge funds and bitcoins are examples.

What is the objective of asset management? ›

The goal of any Asset Management process is to use a system-wide approach in order to improve operations and make the organization more effective by considering the full investment and life cycle of assets.

What is main purpose of asset management and reliability? ›

An Asset Management & Reliability program combines managerial art with engineering science to coordinate all asset management activity within a business enterprise, to realize maximum operational and financial value from the business' critical physical assets.

What are the 7 types of assets? ›

What are the Main Types of Assets?
  • Cash and cash equivalents.
  • Accounts Receivable.
  • Inventory.
  • Investments.
  • PPE (Property, Plant, and Equipment)
  • Vehicles.
  • Furniture.
  • Patents (intangible asset)
24 Nov 2022

What are the 5 types of assets? ›

When we speak about assets in accounting, we're generally referring to six different categories: current assets, fixed assets, tangible assets, intangible assets, operating assets, and non-operating assets. Your assets can belong to multiple categories. For example, a building is an example of a fixed, tangible asset.

What is another name for asset management? ›

The term asset management is synonymous with wealth management.

What are 2 types of assets? ›

Assets can be grouped into two major classes: tangible assets and intangible assets. Tangible assets contain various subclasses, including current assets and fixed assets. Current assets include cash, inventory, accounts receivable, while fixed assets include land, buildings and equipment.

What are top 10 assets? ›

15 Most Important Assets That Will Increase Your Net Worth
  • Owning Your Primary Residence. Homeownership ranks among the most common ways people gain a substantial increase in net worth. ...
  • Second Home. ...
  • Retirement Savings. ...
  • Education. ...
  • Rental Real Estate. ...
  • Health. ...
  • College Savings. ...
  • Maintain Your Home.
22 Nov 2022

What are the 6 classes of assets? ›

An asset class is a way to categorize different types of investments with similarities. Types of asset classes include: stocks, bonds, Cash equivalents or money market vehicles, real estate, commodities, and cryptocurrency.

What are the roles and responsibilities of asset management? ›

Asset managers manage and monitor a company's assets. This could include property, money, stocks, shares and bonds, commodities, equities and other financial products. As an asset manager, you'd aim to maximise your employer's return on investment.

What is asset management principles? ›

These principles of asset management are: Output Focus, Capabilities, Level Assurance, and Learning Organisation.

What is the process of asset management? ›

Asset management is the process of planning and controlling the acquisition, operation, maintenance, renewal, and disposal of organizational assets. This process improves the delivery potential of assets and minimizes the costs and risks involved.

What is the value of asset management? ›

2 Value of Asset Management

Asset management involves the development of a desired balance of performance, cost and risk, to achieve the organizational objectives. Value relates to the organizational objectives as do performance, cost and risk.

What are the four fundamentals of asset management? ›

Each asset has a life cycle that can be digested into four key stages:
  • Planning.
  • Procurement/Acquisition.
  • Operation and Maintenance.
  • Disposal.

What are the 4 current assets? ›

The assets considered current vary by industry, but generally, they fall into these sub-accounts: Cash and Cash Equivalents, Marketable Securities, Accounts Receivable, Inventory, and Other Liquid Assets.

What are your top 3 assets? ›

Your three greatest assets are your time, your mind, and your network. Each day your objective is to protect your time, grow your mind, and nurture your network. Top performing salespeople understand what this means and they don't allow themselves to fall victim to spending time on non-revenue producing activities.

What are 4 asset accounts? ›

Here are some examples of asset accounts:
  • Cash.
  • Short-term Investments.
  • Accounts Receivable.
  • Allowance for Doubtful Accounts (a contra-asset account)
  • Accrued Revenues/Receivables.
  • Prepaid Expenses.
  • Inventory.
  • Supplies.

Is cash a asset? ›

In short, yes—cash is a current asset and is the first line-item on a company's balance sheet. Cash is the most liquid type of asset and can be used to easily purchase other assets. Liquidity is the ease with which an asset can be converted into cash.

What are the three sources of assets? ›

Sources of Assets

In summary, assets come from the equity of the owners, liabilities to creditors, and income from operations.

Who is responsible for asset management? ›

The asset management industry is largely governed by two bodies—the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Although they are separate, there is an overlap between these and other agencies.

Which asset management is best? ›

The 6 Best Asset Management Software of 2022
  • Best Overall: ManageEngine AssetExplorer.
  • Best for Small to Medium Businesses: InvGate Assets.
  • Best for Custom Reporting: Ivanti IT Asset Management.
  • Best Value: Asset Panda.
  • Best for Mobile Applications: MMSoft Pulseway.
  • Best for Tracking Physical Assets: GoCodes.

Who is the biggest asset manager? ›

Rankings by Total Managed AUM
RankProfileManaged AUM
3.Fidelity Management & Research$3,688,587,311,060
4.The Capital Group Cos. Inc.$3,099,186,116,994
91 more rows

What is an example of asset management? ›

The term asset management is often used in the financial sector to refer to people and companies that manage investments and property of others. These are, for example, asset managers who work for a pension fund to manage the pensions of a group of the population.

What are the key principles of asset management? ›

These principles of asset management are: Output Focus, Capabilities, Level Assurance, and Learning Organisation.

What are the key functions of asset management? ›

The purpose of the Asset Management Function is to provide resources and expertise to support the acquisition, in-service support and disposal of the physical assets required by the organization.

What is asset management life cycle? ›

Asset Lifecycle Management (ALM) is the process of optimizing an asset's reliability and operational performance during its lifespan. Enterprise Asset Management, EAM, is the term which defines the management of the maintenance of physical assets of an organization throughout each asset's life cycle.

What are the types of assets? ›

Types of Assets
  • Cash and cash equivalents.
  • Accounts Receivable.
  • Inventory.
  • Investments.
  • PPE (Property, Plant, and Equipment)
  • Vehicles.
  • Furniture.
  • Patents (intangible asset)
24 Nov 2022


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