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What is asset management and why do you need it?

December 9, 2020
Business team working together on asset management task

What is asset management?

Asset management is a set of procedures focussed on managing digital, financial, and physical assets. Examples of financial assets are bank accounts and insurance policies. An example of a physical asset is real estate.

There is not yet a universally adopted formal description for a digital asset. Some people include in that category only assets such as social and email accounts and game artefacts, while others also include financial digital assets, such as cryptocurrencies.

Asset management has various goals. Let’s review these.


The first goal of asset management is to protect your assets.

The protection is different for different types of assets. For example, estate planning and trusts can help protect assets against creditor claims, digital inheritance services can ensure that your beneficiaries will be aware of your assets, be able to identify and locate them, and receive support in the claiming process, and insurance policies can help protect your real estate against a weather disaster.

There is no one-size-fits-all protection, but there are a few important steps you can take:

  • Implement protection of the value of your assets. In this category fall insurances, for example.
  • Implement protection that will increase the chance that your loved ones will inherit your assets. Your family probably wouldn’t be happy if you protected the value of your assets, but, if something happened to you, the assets didn’t go to the beneficiaries. In this category, consider using digital inheritance services or, at least, a secure digital vault as a minimum form of protection.


The second goal of asset management is to increase the value of your assets.

This applies usually to financial assets. Some people handle this task themselves by investing in stock markets and buying company stocks, investing in real estate, choosing a bank which provides the highest interest rate for a savings account, etc.

Other people prefer to hire professionals to handle this task. These professionals are usually wealth management companies and financial advisors. The benefit of using professionals is that you can usually get information about their historical performance, i.e., how much they have increased the value of the assets in their portfolio.

The downside is that they usually charge you a fee for these services. So it’s up to you to weigh up the potential benefit of having professionals taking care of your assets versus the fee which they charge for that activity.


When is the right time to think about asset management?

It’s a common misconception that asset management is only for wealthy people. This is not quite true. Let me ask you, is it more important for a family in financial difficulties to find out that they are the beneficiaries of a $500K life insurance policy, or for a high-net-worth individual?

You can see that asset protection is even more important for people who are not wealthy. For them, getting a life insurance payout or inheriting a bank account might make the difference between maintaining and improving their quality of life and experiencing a significant deterioration in their circumstances.

Another misconception is that only wealthy people have many and complex assets. The reality is that many people from the middle class have various assets such as:

  • insurance policies
  • bank accounts
  • credit cards
  • real estate
  • retirement plans
  • pension funds.

People working in tech companies receive stock options and RSUs. Investing through online trading platforms and brokers has become more and more popular. Expats often have assets in multiple countries – a local pension fund, insurance, and bank accounts, for example.

Quite often, the reality is that people, despite not being super wealthy (yet!), have way more assets than they think they possess, so it’s never too early to make use of asset protection services.

The same goes for increasing your wealth. It’s never too early to think about how you can increase the value of your assets.


Should I do it myself or hire a wealth management company and financial advisors?

The answer to this question largely depends on the value of your assets. Most wealth management companies and financial advisors have a required minimum value. And it’s understandable, as you won’t see the benefit of working with them if your assets don’t amount to much.

If, for example, they manage to make a 2% better return on your assets, that 2% is a pretty good sum if the assets are $1M, but it is not super significant if the assets are only $5K. In this case, 2% will be $100 per year, or less than $10 per month.

From the perspective of the asset management company, it won’t make sense either. If their fee is 1%, for example, it means that they’ll get less than $5 per month if they manage your assets of $5K.

So while there is no strict rule about it, it makes sense to hire a wealth management company if your assets are at least $500K, excluding your real estate.

Why do we exclude real estate? Because it can skew the picture. Imagine, for example, that someone has inherited a normal house but in a high-end area, but the value of the other assets of that person is pretty modest.

In this case, even though the total value of all the assets will be high due to the house, the value of the assets which can be actively managed by the wealth management company will be pretty small, so again, it does not make sense to hire such a company to do the job.


What are the risks if I don’t do asset management?

You might wonder, hey, what will happen if I skip asset management altogether? The answer is that you will run a high risk of some very bad things happening. For example, if you don’t implement asset protection through digital inheritance or other means, your family might not inherit your assets at all.

Currently, there are approximately $100B of so-called unclaimed assets in the USA alone. In the UK, they amount to £77B. Globally, we are talking about a trillion-dollar problem.

The primary reason for the problem is that so many family members are not aware of the assets, or they don’t know how to identify or locate them. As a result, they simply cannot claim them.

Another factor which contributes to the problem is that companies which hold assets, such as banks, insurance companies, and online trading platforms, don’t have the legal obligation to inform the beneficiaries if something happens to the assets’ owners. Even if they have the contact details of the beneficiaries!

So it’s not surprising that there are billions of dollars unclaimed around the world. Unless you implement active asset protection and management, the chances are high that your assets will stay in the companies that hold them, instead of reaching your family and the rightful beneficiaries.

Peter Minev
Co-founder of DGLegacy®, the digital legacy planning and inheritance app that protects your assets and secures your family when it matters the most. Author of the book Building TECH. Learn more: https://topstrengthener.com/about-the-book/