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Starting an Asset Management Firm – A Complete Guide

Do you want to start a asset management firm? If YES, here is a complete guide to starting a asset management business with NO money and no experience.

Okay, so we have provided you an in-depth sample asset management firm business plan template. We also took it further by analyzing and drafting a sample asset management firm marketing plan backed up by actionable guerrilla marketing ideas for asset management firms. In this article, we will be considering all the requirements for starting a asset management business. So put on your entrepreneurial hat and let’s proceed.

Why Start an Asset Management Firm?

In its simplest term, an asset management company (AMC) is a team of professionals within a financial firm that are dedicated to managing cash and investment assets for clients; it is a firm that invests its clients’ pooled funds into securities and other investment vehicles for the purpose of generating profit. Asset management firms provide investors with more diversification and investing options than they would have by themselves.

An asset management firm is one of the businesses an entrepreneur can successfully start small and perhaps with a functional home office without breaking the bank for cash. At the same time, big – time investors can also leverage on the high demand for professional asset managers by larger corporations to set up their own well – organized asset management firms in strategic locations within a business district in the United States of America.

It is important to clearly state that before launching an asset management firm; it will be a wise business decision to analyze the existing asset management firms in and outside of your area. Also, it would be essential to check the existing competition as well as know their strengths and weaknesses.

Being conversant with the flaws of the existing asset management firms means that you would be able to learn from their mistakes, and in turn come up with a better and more preferred asset management firm devoid of the errors and weaknesses of others.

If you have done the required feasibility studies and market research, then you might want to launch your own asset management firm.

Starting an Asset Management Firm – A Complete Guide

  • Industry Overview

Asset management firms fall under the portfolio management industry comprising firms that actively manage assets for individual and corporate clients. Investment portfolio managers have the authority to make investment decisions and generate revenue through fees that are based on service and asset (portfolio) performance. Generally, players in the industry manage assets for investment vehicles such as mutual funds, hedge funds and variable insurance products et al.

If you are a close watcher of the portfolio management industry, you will agree that despite recent volatility in global capital markets and an investor push towards passively managed funds, the performance of the portfolio management industry is expected to improve strongly going forward. Industry operators generate revenue from fees which are largely calculated as a specific share of total assets under management (AUM).

It is on record that by 2012, the revenue generated in the industry passed pre – recessionary levels; plus, the industry revenue is projected to grow in the coming years. Improving market conditions after poor global equity returns in 2016 will push up stock returns and bond yields, causing asset under management to grow going forward. So also, demographic trends are expected to increase demand for the services of asset managers.

The Portfolio Management industry that asset management firms is a part of will continue to experience growth in all parts of the world especially in developed countries such as United States of America, Canada, United Kingdom, Switzerland, Germany, Australia, South Korea, Japan and China et al.

Statistics has it that in the United States of America alone, there are about 20,247 licensed and registered asset cum portfolio management firms scattered all across the length and breadth of the country and they are responsible for employing about 196,411 employees.

The industry rakes in a whooping sum of $233 billion annually with an annual growth rate projected at 3.3 percent within 2011 and 2016. It is important to state that no organization can boast of having a dominant share of the available market in the industry.

A report recently published by IBISWorld shows that the portfolio management industry operates with a low level of capital intensity. The report also estimates that for every $1.00 spent on wages, the industry will allocate $0.06 to capital investment; this 2016 figure represents a small decline from capital intensity in 2011.

Capital-intensive IT functions such as trading and asset services are largely outsourced to securities brokers and custodian banks. IT outsourcing to these third parties has allowed the industry to transition from a fixed to a variable cost structure, which enables industry players to keep profit margins high. As a result, the industry is considered to be labor intensive, with wages accounting for an estimated 30.9 percent of the total industry revenue in 2016.

The portfolio management industry will continue to blossom because corporate organizations, accredited investors, business men and women, households and international business community et al will not relent in ensuring that their assets are well – managed.

Lastly, starting an asset management firm requires professionalism and good grasp of how investment works on a global platform. Besides, you would need to get the required certifications and licenses and also meet the standard capitalization for such business before you can be allowed to start an asset management firm in the United States or before clients will be able to trust their assets and investments under your care. The industry is heavily regulated to guide against fraud and criminality.

Starting an Asset Management Firm – Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those who require the services of an asset management firm is not restricted to people and corporate organizations in your immediate community or state, but it cuts across people and corporate organizations who are interested in investing their money as a means of netting more money and entrusting the management of their assets and other investment portfolios to professionals all over the world to manage for them. This is so because asset managing is a worldwide platform hence the leverage to work for people and corporate organizations all across the globe.

So, if you are looking towards defining the demographics of your asset management firm, then you should make it all encompassing. It should include business oriented people, investors and corporate organizations within and outside the United States of America

List of Niche ideas Within the Asset Management Firm That You Can Specialize in

Most asset management firms are involved in managing cash and investment assets for their clients, which is why it seems like there are no niche areas in the industry. But on the other hand, some asset management firms may decide to major in some key areas such as;

  • Large-cap equity, government fixed income and structured products
  • Equity specialties and fixed income products
  • ETFs and passively-managed products
  • Alternatives asset management
  • Solutions Products and Others (target date products and LDIs)

The Level of Competition in the Portfolio Management Industry

The level of competition in the portfolio management industry cum asset management line of business does not in any way depend on the location of the business since most asset management firms can operate from any part of the world and still effectively compete in the portfolio management industry.

When it comes to asset management services, distance is never a barrier when competing for clients especially international clients. What most clients want is result, hence they are ready to hire the services of an asset manager no matter the part of the world they operate from as long as they have good track record and can deliver excellent results when it comes to giving them good returns on their investments.

But over and above, there are several asset management firms and even investment portfolio management firms, investment banks and investment cum financial consultants scattered all around the United States and in the cyber space.

So, if you choose to start your own asset management firm in the United States, you will definitely meet stiff competitions not only amongst asset management firms, investment portfolio management firm and investment banks in the United States, but also all over the globe especially if you choose to specialize in working for international business men, women and corporate organizations.

List of Well – Known Brands in the Industry

In every single industry, there are brands that accomplish better or are better regarded by customers and the general public than others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.

These are some of the leading asset management firms in the United States of America and also in the globe;

  • BlackRock (United States)
  • UBS Global Asset Management (Switzerland)
  • Allianz Asset Management (Germany)
  • The Vanguard Group (United States)
  • State Street Global Advisors (United States)
  • PIMCO (United States)
  • Fidelity Investments (United States)
  • AXA (France)
  • P. Morgan Asset Management (United States)
  • Credit Suisse Asset Management (Switzerland)
  • Chevy Chase Trust Company
  • Hightower Advisors, LLC
  • Oxford Financial Group, LTD
  • Comprehensive Financial Management, LLC
  • AT Investment Advisers, Inc.
  • Plante Moran Financial Advisors
  • Brownson, Rehmus & Foxworth, Inc.
  • Innovest Portfolio Solutions, LLC
  • Convergent Wealth Advisors, LLC
  • KLS Professional Advisors Group, LLC

Economic Analysis

As it relates to starting an asset management firm, you just have to get your feasibility studies and market research right before going into the business. It is important to mention that the asset management firm business is not for rookies; it is for professionals who have appreciable years of hands – on experience in the financial consulting and related industry over the years.

Despite the fact that the start – up capital for beginning and successfully running an asset management firm is not on the high side, it will not be out of place if you ensure that you take all that needs to be taken into deliberation before launching the business. Besides, you are expected to rent / lease an office space in a good business district and properly brand your business for clients to be able to entrust their assets and investment portfolio under your care.

You are expected to work with other experts who will help you with comprehensive economic and cost analysis and of course, the profitability of the business within the location that you intend launching the business. If you get your economic and cost analysis right before launching the business, you may not have to stay long before you breakeven and start smiling to the bank.

Starting Your Asset Management Firm from Scratch vs Buying a Franchise

When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful asset management firm, but unfortunately, you can hardly come by the franchise of any asset management firm. The truth is that it is a business that you can start from the scratch as long as you have the required qualifications, business expertise and hands – on experience.

If you truly want to build your own brand after you must have proved your worth in the portfolio management industry and other related financial consulting businesses, then you might just want to start your own asset management firm from the scratch.

It will pay you in the long run to start your asset management firm from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.

Please note that most of the big and successful asset management firms and investment portfolio management firms around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success and of course you can build your own asset management firm brand to become a successful brand with corporate and individual clients from all across the length and breadth of the United States of America and other countries of the world.

Possible Threats and Challenges You Will Face When Starting an Asset Management Firm Business

If you choose to start your own asset management firm today, one of the chief challenges you are likely going to face is the presence of well – established asset management firms and other related businesses such as investment portfolio management firms, investment banking and securities dealing services firms and also other related financial consultants who are offering same services that you intend offering. The only way to avoid this challenge is to create your own market.

Some other threats that you are likely going to face as an asset management firm operating in the United States are unfavorable government policies, the arrival of a competitor within your location of operation and global economic downturn which usually affects purchasing/spending power. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.

Starting an Asset Management Firm – Legal Matters

  • Best legal entity to use for this type of business

When considering starting an asset management firm, the legal entity you choose will go a long way to determine how big the business can grow as some asset management firms design their business and services for regional/community market, some for national market, while others for the international market.

Generally, you have the option of either choosing a general partnership or limited liability company for your asset management firm. Ordinarily, general partnership should have been the ideal business structure for a small – scale asset management firm especially if you are just starting out with a moderate start – up capital and covering a defined location.

But if your intention is to grow the business and have clients from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.

Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.

These are some of the factors you should consider before choosing a legal entity for your asset management firm; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.

If you take your time to critically study the various legal entities to use for your asset management firm, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially if you have the plans of going public.

Catchy Business Name ideas Suitable for an Asset Management Firm

When it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.

If you are considering starting your own asset management firm, here are some catchy names that you can choose from;

  • Rivulets Asset Management Firm, LLC
  • Excellent Pinnacle Asset Management Group, Inc.
  • Baroness Sydney & Associates Assets Managers, LLP
  • Asset Solution® Asset Management Firm, Inc.
  • Lackey Newland® Asset Management Firm, LLC
  • Cooper Mills® Asset Management Group, Inc.
  • Tally Carson® Asset Management Firm, LLC
  • Joseph Moore® Asset Management Firm, LLP
  • Team Excel® Asset Management Firm, LLP
  • David Cantone® Asset Management Firm, Inc.
  • Horace Nelson® Asset Management Firm, Inc.
  • Business Pride® Asset Management Firm, Inc.

Insurance Policies

In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your asset management firm.

Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own asset management firm in the United States of America;

  • General insurance
  • Risk Insurance
  • Credit insurance
  • Deposit insurance
  • Financial reinsurance
  • Lenders mortgage insurance
  • Health insurance
  • Liability insurance
  • Workers compensation
  • Overhead expense disability insurance
  • Business owner’s policy group insurance
  • Payment protection insurance

Intellectual Property Protection/Trademark

If you are considering commencing your own asset management firm, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.

Is Professional Certification Needed to Run an Asset Management Firm?

Apart from the results you produce as it relates to return on investment (ROI) and effectively managing the assets of your clients, professional certification is one of the main reasons why some asset management firms stand out. If you want to make an impact in the asset management firm line of business cum portfolio management industry, you should work towards acquiring all the needed certifications in your area of specialization.

These are some of the certifications you can work towards achieving if you want to run your own asset management firm;

  • CPM Certified Chartered Portfolio Manager AFA Accredited / The Certified Portfolio Manager (CPM®)
  • MoP® Certification – Management of Portfolios
  • The CISI Diploma in Investment Compliance
  • The Program & Portfolio Management Certification (PPMC)®

Please note that the higher your qualifications and experience (expertise), the easier it is for you to secure high profile portfolio and asset management deals from corporate and individual clients.

List of Legal Documents You Need to Run an Asset Management Firm

The importance of having the necessary documentation in place before launching any business in the United States of America cannot be overemphasized especially for an asset management firm. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.

These are some of the basic legal documents that you are expected to have in place if you want to legally run your own asset management firm in the United States of America;

  • Certificate of Incorporation
  • Business License and Certification
  • Business Plan
  • Non – disclosure Agreement
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Consulting contract documents
  • Online Terms of Use
  • Online Privacy Policy Document
  • Apostille (for those who intend operating beyond the United States of America)
  • Company Bylaws
  • Insurance Policy
  • Memorandum of Understanding (MoU)

Financing Your Asset Management Firm

Starting an asset management firm is indeed cost effective because your core duty is to manage the asset and portfolio of your clients; hence you are not required to purchase any heavy duty machine or equipment that can be expensive. Securing a standard office in a good business district, equipping the office and paying your employees are part of what will consume a large chunk of your start – up capital.

When it comes to financing a business, one of the first things you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.

Here are some of the options you can explore when sourcing for start – up capital for your asset management firm;

  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell of shares to interested investors
  • Applying for loan from your bank
  • Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
  • Sourcing for soft loans from your family members and your friends

Choosing a Suitable Location for your Asset Management Firm

Asset management firms and other related businesses such as investment portfolio management firm, investment banking and securities dealing services firms and most financial services based type of businesses require that you see physically with your clients, hence it must be located in a good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profits from the business.

The fact that you can operate your asset management firm from any part of the world does not mean that location has little influence on the success of an asset management firm. If you have taken your time to study the portfolio management industry cum financial consulting industry, you will realize that asset management firms and financial consultancy agencies are willing to pay expensive rents in order to stay in a busy business district; a place where business and financial activities are at its peak.

Most importantly, before choosing a location for your asset management firm, ensure that you first conduct thorough feasibility studies and market survey. The possibility of you coming across similar business that just closed shop in the location you want to open yours can’t be ruled out.

These are some of the key factors that you should consider before choosing a location for your asset management firm;

  • The demography of the location as it relates to the number of wealthy people, investors and potential investors in the location
  • The demand for the services of asset management firm related businesses in the location
  • The purchasing power of the residents of the location
  • Accessibility of the location
  • The number of asset management firms, investment portfolio management firms and related services in the location
  • The local laws and regulations in the community/state
  • Traffic, parking and security

Starting an Asset Management Firm – Technical and Manpower Details

On the average, there are no special technologies or equipment needed to run this type of business except for customized asset management and investment portfolio management software, social media management software applications and other financial related software apps. Also, you will definitely need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).

When it comes to choosing between renting and leasing an office space, the size of the asset management firm you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard asset management firm, then you should consider the option of leasing a facility for your office.

As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Asset Manager/Portfolio Manager, Risk Manager, Chief Financial Officer (CFO) / Chief Accounting Officer (CAO), Business Development Executive/marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.

Over and above, you would need a minimum of 5 to 10 key staff to effectively run a medium scale but standard asset management firm. Please note that there will be times when you will be expected to go out of your way to hire experts to help you handle some high profile financial consultancy contracts, especially from big corporations.

If you are just starting out, you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you, which is why you should make plans to partner with other financial consultants/experts.

The Service Delivery Process of an Asset Management Firm

The way asset management firms work varies from one agency to another, but ideally, an asset management firm is expected to first and foremost build a robust company profile before biding for asset management and investment portfolio management services contracts from corporate organizations, it will give them an edge amongst their competitors.

Most asset management firms get assets and funds from investors who are interested in investing, and they assist them in managing their assets and also investing their funds over a period of time as agreed by both parties. Despite the fact that asset management is highly risky, it is still a profitable venture hence there is an agreement between the asset management firm and the client as it relates to the commission they are expected to make from the deal. Most asset management firms charge based on percentage and also a fix consultancy/business administrative fees.

It is important to state that an asset management firm may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI), efficiency and flexibility; the above stated business cum services process of an asset management firm is not cast on stone.

Starting an Asset Management Firm – The Marketing Plan

  • Marketing ideas and strategies

As an asset management firm, you would have to prove your worth over and over again before attracting business deals from corporate clients. So, if you have plans to start your own asset management firm, it will pay you to build first build a successful career in the portfolio management industry.

People and organizations will hire your services to help them handle all their assets, investments and wealth management portfolios if they know that they are going to get good returns on their investment.

So, when you are drafting your marketing plans and strategies for your asset management firm, make sure that you create a compelling personal and company profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to asset management and the organizations and people you have worked for in time past. This will help boost your chances in the market place when sourcing for clients/investors.

Please note that in most cases when you market your services to corporate organizations, you will be called upon to defend your proposal, so you must be pretty good with presentations. Here are some of the platforms you can utilize to market your asset management firm;

  • Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, accredited investors, business men and women, entrepreneurs, households and the international business community
  • Advertise your business in relevant financial magazines, radio and TV stations (make yourself available for asset management and investment portfolio management services related talk shows and interactive sessions on TV and Radio)
  • List your business on local directories
  • Attend international financial cum investment expos, seminars, and business fairs et al
  • Create different packages for different category of clients in order to work with their budgets
  • Leverage on the internet to promote your business
  • Join local chambers of commerce and industries around you with the main aim of networking and marketing your services; you are likely going to get referrals from such networks
  • Engage the services of marketing executives and business developers to carry out direct marketing for you

Strategies to Boost Your Asset Management Firm Brand Awareness and Create Your Corporate Identity

If your intention of starting an asset management firm is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.

In promoting your brand and corporate identity, you should leverage on both the print and electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brand, besides it is pretty much effective and wide reaching.

Another strategy is to sponsor relevant community based programs, TV and radio programs, advertise your business in relevant magazines and newspapers. Below are the platforms you can leverage on to boost your brand and to promote and advertise your business;

  • Place adverts on financial magazines and related newspapers, radio and TV stations
  • Encourage the use of word of mouth publicity from your loyal customers
  • Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business
  • Ensure that you position your banners and billboards in strategic positions all around your city
  • Distribute your fliers and handbills in target areas in and around our neighborhood
  • Contact corporate organizations, accredited investors, business men and women, households and international business community et al by calling them up and informing them of your organization and the asset management services you offer
  • Advertise your business in your official website and employ strategies that will help you pull traffic to the site
  • Brand all your official cars and ensure that all your staff members and management staff wear your branded shirt or cap at regular intervals.
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