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Asset management: definition and examples

How can you best keep track of your company’s assets? A strong asset management system puts fixed and current assets in order, ensuring easy retrieval and liquidity. Keep reading to find out what asset management means, as well as a few examples of how it’s used in business.

What does asset management mean?

In finance, asset management refers to the overseeing of investment portfolios. Investment banks or individual asset managers will oversee the assets contained within this portfolio, mitigating risk while finding ways to increase their value. Investment services include a variety of products to achieve these goals, including equity, real estate, commodities, and mutual funds. Asset managers conduct research at both the macro and micro level, analysing market trends to grow the portfolio successfully.

This term can also refer to asset management software or other internal systems used to keep track of a business’s assets. The goals of internal or digital asset management systems are the same as with investment services:

  • Mitigate risk

  • Recover assets efficiently

  • Increase the asset’s rate of return

  • Track performance

  • Measure life-cycle costs

  • Promote economic growth

Benefits of asset management

As a company grows, its assets will increase accordingly. It’s important to know the current value of each asset at any given time, to be sure that they’re being used efficiently. It’s also important to check the value of assets on a regular basis to ensure that all financial statements are accurate.

For example, if an asset has been lost or stolen, this should be highlighted so that the asset is taken out of the current books. Asset management also helps a business identify and manage any associated risks. Additional benefits of asset management include:

  • Improved efficiency – by tracking the company’s assets from the beginning to end of their life cycles, asset managers can uncover wasteful purchases and inefficient uses.

  • Reduced expenditure – assets like tools, equipment, and vehicles can be managed from a central system, which reduces new expenditures.

  • Improved compliance – companies and government agencies are required to provide detailed reports regarding the acquisition and disposal of assets. Using a central asset management system keeps this information close at hand for compiling reports.

Asset management examples

So, what does asset management look like in reality? Here are just a few ways that this principle is put into practice.

1. High-end asset management institutions

Clients open an asset management account that comes with a personal financial advisor. You’ll have access to a range of investment options to make the most existing assets. Asset managers at institutions like BlackRock or Fidelity Investments will look at the client’s tax situation, liquidity needs, and income requirements.

2. Mid-range asset management firms

Mid-range asset management companies like Vanguard specialise in serving smaller investors, with options like mutual funds that pool together resources. Mid-range clients don’t need to worry quite as much about tax structures or asset placement, but assets can still be put to work in a central investment portfolio.

3. Digital asset management tools

If you’d prefer to put an internal asset management plan in place, look for digital platforms and software that use algorithms to manage portfolios. Tracking software can also be used as a central database of your existing assets.

4. Individual asset managers

Asset management tools also include registered investment advisors, who outsource the management to a third party but can provide bespoke advice.

How to create an asset management plan

No matter your business size, it’s worth creating a strategic management plan. Here’s a step-by-step guide to follow.

Step 1: Perform an asset inventory.

Before you can invest more wisely or input your assets into a digital management system, you need to perform a stock take. A full asset inventory should look at the total number of assets your company owns, where they’re located, the current value of each, and when they were acquired.

Step 2: Calculate asset life cycle.

You’ll need to know the life-cycle costs of each asset. This is particularly important for computers or other electronics, which depreciate significantly over time. Understanding life-cycle costs helps your business plan for maintenance and disposal. You should also think about service costs for each asset, to keep them in top shape.

Step 3: Set financial objectives.

Finally, you’re ready to engage with the financial planning stage of asset management. Whether it’s through a digital asset management platform or high-end firm, you need to put a solid plan in place to mitigate risk and increase value.

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