Advancing within the wealth management sector often leads you to explore roles that offer greater autonomy and the potential for increased earnings. After all, you want progress: both financial and professional. Transitioning to an external asset manager (EAM) position represents a strategic move for many, providing the opportunity to manage client assets independently while leveraging institutional resources. Hence, we shall discuss this role in this article.
The Role of an External Asset Manager
An external asset manager operates independently from traditional financial institutions, offering personalized investment management services to clients. Unlike in-house advisors, EAMs maintain autonomy over their client relationships and investment strategies, often partnering with multiple banks and financial entities to access a diverse range of products and services. This independence allows EAMs to provide tailored solutions that align closely with their clients’ financial goals and risk profiles.
What does it mean in practice? This role might be both highly challenging and rewarding. On the one hand, you aren’t restricted by the asset options provided (or preferred) by your organization, but on the other, you have to work out your partnerships on your own. What’s more, you’ll need to navigate the diverse range of products and services to stay up to date and always provide your clients with the best solutions.
Steps to Transition into an External Asset Manager Role
Is it worth it to become an external asset manager? We’ve briefly discussed your role, but we also need to acknowledge the transition process. After all, if it’s too complex, then there might be better directions to pursue in your wealth management career. So, what does it take to start working as an EAM?
Build a Strong Professional Network
The broader your network, the easier it will be for you to conduct your day-to-day operations. Therefore, it’s crucial that you start building it before the transition. Consider visiting finance events, mixing in the financial circles, and using LinkedIn to connect (and talk!) with other financial professionals.
Understand the Regulatory Landscape
Familiarity with the regulatory environment is imperative. Regulations governing EAMs vary by jurisdiction and may include licensing, compliance, and reporting obligations. For instance:
- in Singapore, EAMs must adhere to guidelines set by the Monetary Authority of Singapore (MAS),
- in Switzerland, the Swiss Financial Market Supervisory Authority (FINMA) oversees EAM activities.
Establish a Business Structure
Deciding on the appropriate business model is a critical step. Options include forming a sole proprietorship, partnership, or limited liability company. Each structure has implications for liability, taxation, and operational flexibility. Consulting with legal and financial experts can assist in determining the most suitable arrangement for you.
Secure Partnerships with Custodian Banks
Collaborating with custodian banks is essential for managing client assets effectively. These partnerships provide access to trading platforms, research tools, and administrative support. Selecting reputable and reliable custodian banks ensures the security and efficiency of asset management operations.
Find the Right IT Solution
Since you will be working with multiple custodian banks and financial partners, you need a good IT platform to integrate your data and overview all your operations. The best wealth management platforms for external asset managers offer portfolio consolidation features, so this is something you should be looking for.
So, Is Transitioning into an External Asset Manager Worth It?
Becoming an external asset manager can be worth it, assuming you’ve already built a decent network of connections. At the same time, remember that your earnings will depend on the number and worth of your clients. Therefore, it’s not a simple yes or no question; it’s a question of whether you can make it worth it or not.