What is Investment Management?

 

Investment management refers to the practice of handling assets to address specific investment goals. The assets in question are often liquid or classified as securities, but they can also include other commodities.

Investment management is practiced by professional investment managers, who understand the goals of the investor and perform specific actions to work toward them. Depending upon the nature of the investment, they are also referred to as fund managers or asset managers.

Along with buying and selling assets, investment managers also plan effective portfolio management for the given period of their responsibilities. They can also carry out additional tasks, such as bank transfers.

Investment management services are available to individuals and institutions alike, with specialized solutions accessible to both segments. Some financial institutions offer investment management to retail or average investors, while others only provide them to accredited or high-net-worth individuals. In both cases, specialized or alternative products are available to only those investors who can handle additional risks with their funds.

Investment management can also refer to pooled funds, which use several investors' collective funds to create a mutual investment vehicle. Mutual funds, hedge funds, and pension funds fall under these types of funding mechanisms.

If you are interested in learning more about the benefits of investment management, contact our team of financial advisors in Maryland. We have more than 25 years of experience in financial planning, advisory, and investment management in Columbia, Maryland. We can also help you manage your retirement planning, legacy planning, trust services and financial planning. Schedule your complimentary consultation today by calling (410-740-0220)!

 

Learn everything you need to know about investment managements:

• What are Managed Investments?
• What are the Benefits of Investment Management?
• What is the Risk of Investment Management?
• What is the Difference Between Asset Management and Investment Management?
• Are Investment Management Fees Deductible?
• How Investment Management Works
• Asset and Wealth Management Services

What are Managed Investments?

Managed investments refer to pooled funds, which combine several investors' designated funds into a single investment vehicle. These funds are managed by specialized professionals such as investment managers or fund managers who decide to buy and sell assets to achieve investors' shared goals.

Managed investments can come in many forms, but some of the most popular mechanisms include mutual funds and hedge funds. An investment manager can help you find a managed investment vehicle that may fit your needs.

By combining the assets of multiple investors in one place, managed investment enhances each investor's outreach. The combined purchasing power of managed investments allows each investor to approach opportunities that they otherwise wouldn't be able to entertain with the limit of their funds.

Managed investments are highly popular within retail or average investors who want to boost their income and receive passive profit through their funds. But these investments are also utilized by institutional or accredited investors to diversify their portfolios and their other assets.

These managed investment products are easily accessible by individuals and offered by various financial institutions. They differ in terms of the investment strategy, its payout, and the institution's reputation that is offering the product.

 

What are the Benefits of Investment Management?

When you turn to investment management services, you don't have to take your investment decisions alone and don't need to carry out relevant activities all by yourself. Instead, your investment management team can handle everything for you. This takes the burden off of your shoulders while also providing you with highly specialized services to boost your income.

Investment management allows you to benefit from seasoned professionals' informed advice, who make their assessments using personal experience and tech-powered analysis tools. These suggestions are particularly useful when you are deciding to invest in certain products. At the same time, they are also quite helpful during the period of your ongoing investments.

Since the financial sector is full of innovation, opportunities, and risks, your investment manager's hands-on experience and skills help you at every step of your investment journey. By assimilating your needs, they can help you understand which investment products may be right for you, which opportunities you should explore in the future, and what type of financial experiments should you stay away from at all costs. This aims to ensure that you make the right decisions and steer clear of unnecessary risks.

 

What is the Risk of Investment Management?

Financial market movements can be predicted through various traditional approaches and tech-powered tools. However, these projections do not set future market trends in stone. There can be times when things don't turn out as predicted or unforeseen events overpower certain factors used in the analysis.

These risks are also present in investment management, where individual assets can go in the opposite direction of predicted movements. Even though investment managers employ all relevant efforts and required tools to prevent these possibilities, they can still occur for both individual assets and managed investments. Even when these risks may be significantly decreased compared to decisions taken without sufficient experience, they are still there.

Another risk that's present with investment management is a lack of instant access to funds. Since third-party managers are handling your funds, you don't have proactive control over them. This makes it difficult for you to move your funds around by yourself. In case you need to step out of an investment or want to go in a different direction, you have to discuss the possibilities with your investment manager.

 

What is the Difference Between Asset Management and Investment Management?

Asset management refers explicitly to specialized financial management, where an asset manager handles the assets of accredited or wealthy investors. In comparison, investment management is an umbrella term that refers to taking all types of investments, including those for retail investors and pooled funds.

Since asset management caters to more seasoned or resourceful investors, it also has alternative investment options that are not typically available to everyone. These options often contain high risk, but may again come with a higher profit margin.

With that being said, asset management's primary goal remains the same as general investment management products, expanding and growing the investor's portfolio. But the availability of added opportunities sets this specific division of investment management apart from public investments.

Asset management is typically offered by large scale or boutique investment institutions. The asset manager holds intensive experience dealing with high-profile clients and handling different types of investment opportunities such as equity, real estate, and alternative assets. If you want to access asset management solutions, you need to meet specific criteria that determine if your current financial situation allows you to sustain risks.

 

Are Investment Management Fees Deductible?

The short answer: No, investment management fees and expenses are not deductible.

The long answer: According to the Internal Revenue Service (IRS), any investment fees paid to manage your funds or assets are considered miscellaneous itemized deductions. As a result, they are not deductible. 

This classification applies to any expenses related to managing your assets that produce taxable income. This includes generalized investment management, specialized pooled funds, or intensive asset management. 

Investment management fees and expenses vary from institution to institution and depend upon your investment management product. Sometimes, these fees can make up for a significant amount. However, this specific classification by the IRS means that you cannot have it itemized as a deductible regardless of the level of funds involved. 

Keeping this in mind, you must choose an investment management solution that comes at a competitive price point. However, you still need to ensure that you do not compromise on the investment manager's skill or expertise, since that can cost you more than your tax savings in the long run. Finding a balance between affordability and competence is the ideal choice.

 

How Investment Management Works

Investment management works with the involvement of established financial institutions, which handle your portfolio on your behalf and invest in profitable opportunities that may fit your needs.

When you turn to investment management, you typically start a consulting agreement with a financial expert or an investment manager. Depending upon the type of investment you want or the institution you contact, this professional can also be termed as a fund manager, asset manager, or wealth manager.

After understanding your financial portfolio requirements, these investment managers develop a detailed strategy to invest and grow your funds over time. This can include investments in securities, pooled funds, real estate, and alternative assets. Once they have your approval on the strategy, its costs, and its terms and condition, they can handle your funds accordingly.

Your investment manager then starts managing your portfolio regularly, with periodic reviews and discussions being held with you. Their fees and related costs are paid according to your investment agreement. If you want to end the arrangement and pull out your funds from the given opportunity, you can do so according to the terms you agreed upon at the start of your agreement.

 

Asset and Wealth Management Services

Asset and wealth management are often conflated as being the same solution. But they have a stark difference.

While asset management is all about focusing on your investments, wealth management has extensive scope for your overall finances. Asset managers are laser-focused on beneficial investments, while wealth managers also encompass aspects such as savings, assets, and financial planning.

Since both solutions cater to high profile investors, most financial institutions that offer asset management also come with wealth management services. This allows you to avail of both essential options from the same group of experts, which streamlines your financial management and makes it easier for you to enjoy your investments.

Reaching out to the proper asset management and wealth management solution lets you handle critical aspects of your financial matters through a singular entity. This ensures that you don't have to run from one institution for investments and the other to manage your finances. From investment suggestions to tax planning, you can obtain highly capable professionals' advice and services at every step.

---

 

Investment Advisory

 

Investment advisory refers to specific suggestions regarding investment options and opportunities. These strategies are developed after assimilating your short-term needs and long-term plans. As a result, these bespoke investment plans specifically cater to your requirements and aim to get the most out of your funds.

Investment advisory is a highly critical aspect of asset and wealth management, so your wealth manager pays the utmost attention to it. They understand your requirements and do extensive research to develop beneficial yet suitable opportunities for your funds. These options are finalized after intensive exploration by the institution's team and targeted analysis through tech-powered tools. These analyses make sure that the final suggestions carry the support of accurate data, maximize potential income, and minimize possible risks.  

In case you are not comfortable with an investment opportunity, your wealth manager ensures to provide you with alternative options. This ensures that you can find something that goes right in line with your personal investment approach while being thoroughly assessed by experts.

Once you move forward with an investment suggestion, your wealth manager keeps you updated through your preferred communication method.

---

 

Financial Planning

 

Financial planning is an essential part of wealth management. When approached the right way, it ensures that you can have a transparent look at your current financial situation. This allows you to develop a comprehensive strategy to pursue critical goals in the future.

Wealth managers develop a financial plan after going through the necessary details regarding your estate, portfolio, income, and assets. They make it a point to consider your requirements and ensure that the strategy they propose can help you address your long-term objectives.

Financial planning requires a deep understanding of your needs and extensive knowledge of investment products, risk management, retirement strategies, and the tax code. As a result, you need a seasoned expert and a competent financial team to handle all of these aspects.

This is especially true if you are a high net worth individual with an extensive list of assets and goals. This is why your wealth manager must handle a variety of needs without stretching themselves thin. By reaching out to the right experts, you can aim to pursue these goals without a hitch.

---

 

Tax Planning

 

Tax planning refers to managing your wealth, income, and expenses to potentially reduce unnecessary tax liability. Turning to an experienced tax planning team allows you to ethically lower your payable taxes by utilizing tax breaks, classifications, and different strategies that comply with the tax code.

Tax planning is a highly critical division of asset and wealth management for any individual. The wrong step can cause you to pay taxes that do not apply to your situation, while an uninformed approach can land you in the territory of inadvertent tax avoidance.

To ensure that you steer clear of any unsavory outcomes, the right wealth manager provides that they can create targeted strategies designed to lower your taxes without going against the law's letter.

Apart from regular income management and contribution to retirement plans, tax planning is exceptionally critical if you transfer your estate to your loved ones. Not classifying your assets the right way can cause a large portion to go towards taxes, even when it doesn't have to be the case. But your wealth manager can seek to ensure that the transaction doesn't call for more than your fair share of taxes.

---

 

Retirement and 401K Planning

 

Having a high net worth doesn't mean that you automatically have a retirement plan in place. The absence of a qualified approach can jeopardize your dreams of a comfortable retirement.

To ensure that you are moving forward with a well-thought-out strategy, your wealth manager studies your current financial status and future objectives. With the help of focused analysis and expansive knowledge, they can suggest ways to contribute to your retirement and 401K planning.

This plan seeks to ensure that you can divert your funds to a worry-free retirement without affecting your current finances. At the same time, it also makes sure that you don't have to push your retirement date or dig into your 401K before it's time to do so.

With an extensive investment and savings strategy, you can maximize your contributions towards your future without compromising your present needs. This goes a long way in making sure that you can live your dream life after your retirement. This is why it's crucial to have a wealth manager who can easily guide you through these daunting aspects.