As the technological sector of finance continues to progress and seemingly take over the traditional ways of banking, we have seen numerous past ‘ways of doing things’ become completely irrelevant in today’s modern world. The advancement of technology has rendered many previous business models useless, as these advancements have long surpassed their capabilities. While many methods have been disappearing, there are a few powerhouses that continue to thrive even through the rise of technology. One of these concepts is external asset managers (EAM). As a matter of fact, the rate of prevalence of EAMs is growing.
An external asset manager is a ‘wealth manager’ whose functionality is independent of banks. Alternatively known as independent asset management, this field offers many beneficial services to a particular clientele. Under the umbrella of EAM’s services, we can find tax consultations, inheritance management, money management, estate planning and trading of stocks and bonds. If the level of expertise of the EAM is high, they could offer utility in commodities trading, real estate, private equity, hedge funds, dividends and more. EAMs consider their clients profiles and client demographics in order to offer more specific or beneficial services, specifically adjusted to provide maximal value to the particular needs of each client.
Conventionally, wealthy clients would rely on traditional private banks to manage their money. Banks were all-encompassing, and offered clients everything they could possibly need, all in one place. While it might seem apparent that the all-service banking method was an advantage for banks and clients, it turned out to be one of their biggest disadvantages. As they say, “the jack-of-all-trades is a master of none.” Instead of excelling in one specific service, a vast majority of them were only mediocre. This had mostly to do with the overwhelming number of client profiles each bank possessed, and an inability to keep up with all of the moving pieces. When tailoring services to a particular client of this kind, the number of parameters to be considered can grow into the hundreds. The more clients of this kind a bank has, the more unique investment client profiles needs to be maintained, the more complexity is introduced. At the end, lots of things slipped through the cracks, in particular, client precedence and personal attention became a low priority.
“Building a client profile and tailoring a services package that adequately covers the needs of the client requires a particularly high level of care. Unfortunately, traditional private banks often lack the resources, knowledge or even the ability to manage the vast amount of information needed to provide this kind of service effectively. There’s just too much data to consider,” said Brüc + Bond’s Roni Rabinowitz.
As a result of the overwhelming monopoly of big banks, the financial crisis happened. The world population began to search for alternatives because most people lost trust in the system, and today, financial technology has been quickly and widely embraced. We’ve also seen wealthy clients embrace alternatives, and this has become the rise of EAMs. Because of the external asset managers’ customized specializations, they are able to offer their clients personalized options. All customers can research EAMs and find which specifically can fit their needs and demands. This is far different from traditional banking because the old way only offered generalized solutions. Now, clients can receive specific care and concern from knowledgeable specialists.
Another major change since the financial crisis and the rise of fintech has been drastic modifications in government rules and regulations in regards to the industry. Rules and regulations are being changed on a very consistent basis, and different countries carry their own individual standards. It would be almost impossible for an individual client or institution to keep up with these changes and understand to the full extent what they mean. Today, because of EAM specializations, part of their job is to keep on top of the ever-changing regulatory environment. This means that the client is offered a higher level of security in their financial endeavors.
“Where external asset managers found a niche is in an intermediary role between bank and client. These managers often have few clients, but they can give them very personal and specialized service. To many, this level care is worth a lot,” said Ms. Rabinowitz.
External asset managers have been able to find themselves a new path, serving as a bridge between wealth holders and investment avenues. In this day and age where new technology is taking over all industries, it is quite impressive that the EAM sphere has not only survived, but thrived. The financial crisis has been a trying time for all, but it has opened the way for more advanced, customer-centric, specified services. In this day and age, individual holders and organizations can have full faith in the flourishing EAM market. External asset managers focus on the transient nature of the industry to be certain that wealth holders can manage their money in the most efficient and effective way possible.