Asset management vs investment banking: which one’s for you?
Business owners looking for financial services usually have one of two aims in mind. They may have more money than they immediately need and are looking for a way to make it work on their behalf; or they may be short of money and looking for someone to invest in them, either to help them keep bringing in healthy returns or to finance their development plans. Others are in a position where they can choose between the two and want to work out the best way forward for their businesses.
Asset management companies identify, arrange and manage investments for organisations and private individuals with available financial resources. Investment portfolios can be tailored to suit different needs, with variable investment horizons to fit around future business plans and with differing degrees of liquidity, depending on how quickly assets might need to be cashed in. They can also take into account concerns such as ethical investment or a preference for supporting specific sectors. With a good asset manager to take care of things, business owners don’t need to be directly involved in monitoring their investments all the time but can simply read reports provided to them and trust that their money is in good hands.
Investment banking can provide solutions for businesses that need access to capital in the near term and are willing to trade equity for it. By underwriting the transactions involved, the banks provide a degree of security for all involved. They are often involved in financing mergers, acquisitions and management buyouts. Accessing money through investment banking can give a business the opportunity to expand or acquire new assets when its own liquidity is limited. Investing money in this way can enable a business to forge a substantial connection, often with an element of direct control, with an organisation that may simply be financially promising or may have the added value of being a supplier or distributor.
Beyond the buying or selling aspect of the decision, a key consideration for business owners choosing between these two options is how closely they want to be involved with their investments. At the lending side, investment banking tends to be much more hands-on, which can be good for companies wanting to mould supply chains to suit their needs or develop long-term person-to-person connections within a given sector. With asset management, the degree of involvement varies, but there is generally little direct contact, meaning that investors don’t have the same degree of influence; however, on the other hand, they don’t need to spend time managing their assets day to day and can, instead, concentrate on their core business.
Finding out more
Before making a decision, it’s advisable to do some in-depth research. The Institute of Asset Management has lots of useful advice on its website as well as a downloadable information booklet and updates on any changes in regulatory practice, whilst HMRC provides extensive general advice on investing. Armed with this information, business owners can be confident of making good decisions about how to move forward.
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