Finance based companies make their money by investing money in the stock market. As a rule, the value of a business or a country's currency is dependent on what events are going on in the world and how much money is being invested in companies and sectors within a countries economy.
An asset is money. Within the Financial Industry, when we talk about assets we are talking about money that has been converted into stocks and shares.
The term Asset Management refers to a service that financial trading institutions like banks and brokerage firms offer to prospective clients. This service is all about getting a clients money to generate more money, which is done through investment in stocks and shares or in savings accounts that base their interest rates on the stock market. It is also worth noting that this product is often only available to companies and individuals with a high revenue turnover. This is because the risk involved in investing money on the stock market is very high, this is not a sure fire way to earn money and it is even possible to loose the money you invest. Because of this, investment banks have high fees to not only protect themselves, and to an extent their client from market forces, but also because in order to be successful you need to buy the talent, the brokers that know how to analyse and gamble the money on the markets. And these brokers are not cheap.
Up into about a decade ago, there were governmental rules in place, such as the Glass-Steagall Act which were put in place at the beginning of the 20th century after the Great Depression. These rules prohibited Investment banks from mixing their commercial and investment banking as it was though that this banking act was part of the reason for the economic depression of the late 20s. This act has now been repealed.
The repealing of this act meant that investment banks could engage in Asset Management.
To coin a phrase, you need to spend money to make money. Actually, to coin a couple of phrases, money makes the world go around. The Financial Industry needs to make money and in the process of making money, the industry makes money for its clients which is not just wealthy individuals and big companies but governments as well. Countries, and therefore their governments, trade currency and bonds with other countries and companies, in times of financial hardship it is not uncommon for a country to sell of a national asset to generate the necessary funds it needs to pay a big debt or simply have some capital to stimulate growth in the economy without devaluing the currency. Like the wealthy individuals, countries will have an investment bank that manages its assets. Without asset management individuals, companies and countries would not be able to trade with each other to make money which would cause the worlds economies to stagnate and collapse.
Candice is the Managing Director for an online financial analysis magazine. In the two decades prior to this, she worked for a number of institutions in the Finance Industry, including investment banks that specialised in Asset Management.