Understanding External Asset Managers (EAM): A Growing Trend in Wealth Management

In today’s dynamic financial landscape, investors are increasingly seeking personalized, independent advice to grow and protect their wealth. One trend gaining significant momentum is the use of External Asset Managers (EAM). But what exactly is an EAM, and why are they becoming an essential part of wealth management strategies?

External Asset Managers (EAM)

What is an External Asset Manager (EAM)?

An External Asset Manager (EAM) is an independent firm or individual that provides wealth management services to clients. Unlike traditional private bankers who work for large financial institutions, EAMs operate independently, managing the assets of their clients with complete autonomy. This separation allows them to offer unbiased advice tailored to the specific needs and goals of each client.

In simple terms, EAMs act as a bridge between high-net-worth individuals and financial institutions. They manage clients’ investments while the assets themselves remain held with a custodian bank. This way, clients benefit from personalized advice without being limited to the products or services of a single institution.

Key Benefits of Using an EAM

1. Unbiased Advice

   
   

   One of the main advantages of working with an EAM is the unbiased nature of the advice. Unlike in-house advisors tied to a bank’s products, EAMs have the freedom to choose from a broad range of financial instruments and strategies. This ensures that their recommendations are aligned with the client’s best interests, rather than being driven by a need to sell proprietary products.

2. Personalized ServiceEAMs typically work with a smaller client base, which allows them to offer more personalized, hands-on service. They take the time to understand their clients’ financial goals, risk tolerance, and long-term aspirations, creating tailored investment strategies that are truly customized.

3. FlexibilityWorking with an EAM offers greater flexibility. Clients are not restricted to a single financial institution’s products. EAMs can access multiple banks, financial instruments, and investment platforms, giving clients more options and a diversified approach to wealth management.

4. Cost EfficiencyWhile some may assume that EAMs are more expensive, this isn’t always the case. EAMs often have the ability to negotiate more competitive fees with custodian banks on behalf of their clients. Moreover, because they are independent, they are incentivized to offer competitive pricing to attract and retain clients.

5. Access to Global MarketsMany EAMs operate internationally, providing their clients with access to global markets and investment opportunities that might not be available through a single domestic institution. This global reach can be a critical factor in maximizing returns and managing risks, particularly in an increasingly interconnected financial world.

How Does the EAM Model Work?

Typically, an EAM will have a formal agreement with one or several custodian banks. These banks hold the clients’ assets while the EAM manages the portfolio. The custodian bank provides a secure and regulated environment for asset storage, while the EAM focuses on creating and implementing a strategy to grow those assets.

The client retains full control of their accounts with the custodian bank but delegates the management responsibilities to the EAM. This way, clients can monitor their accounts independently and have peace of mind knowing that their assets are securely held.

Why Are EAMs Gaining Popularity?

In recent years, there has been a shift in how investors perceive wealth management. High-net-worth individuals, in particular, are looking for more personalized, transparent, and independent advice. They want the flexibility to work with multiple financial institutions and the peace of mind that comes from knowing their advisor isn’t biased toward a single bank’s products.

The rise of EAMs can also be attributed to regulatory changes in many countries. These regulations often favor more transparency and independence in financial advice, encouraging clients to seek out EAMs as an alternative to traditional private banks.

Is an EAM Right for You?

If you’re a high-net-worth individual seeking a more personalized, flexible approach to wealth management, an EAM could be a great fit for your needs. They offer independence, transparency, and access to a broad range of financial products that traditional private banks may not. However, it’s important to choose an EAM with a strong track record, relevant experience, and a deep understanding of your specific financial goals.

Conclusion

The role of External Asset Managers is becoming increasingly prominent in today’s wealth management industry. As investors demand more personalized and unbiased advice, the EAM model offers a flexible, client-centric alternative to traditional banking solutions. With their ability to access multiple markets and provide bespoke investment strategies, EAMs are redefining the way high-net-worth individuals manage and grow their wealth.

If you’re considering working with an EAM, make sure to research their experience, credentials, and approach to ensure they’re the right fit for your financial goals.