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Learn From Common Mistakes of Asset Management

Asset management is basically a topic for everyone, not just for financial professionals, simply because everyone virtually has at least some assets needed to be managed. It is not about how much money you have, it is all about how you can manage your money wisely and successfully.

However, there are still many common mistakes and issues for asset managers, no matter how large the size of assets they have. Good news is many experts are open already to sharing their useful experiences on capital management, which can surely save newbies energy and time for learning from lessons. Below is a short list outlining the 7 most common mistakes for capital management business that each asset manager or asset owner must be aware of.

(i) Take Too Little Risks For Asset Growth.

An outstanding asset management team must be able to take affordable, manageable and well-calculated risks. One most common mistake is that asset managers always have a tendency to escape from all risks even if these risks can be contributory to asset growth and can yield good investment returns. Statistics show that people usually earn less if they take too little risks, and those who can earn more usually take more calculated risks. Due to the nature of risks (they exist everywhere in this world), nobody can fully escape from taking risks. Smart business owners should feel comfortable in taking reasonable risks as long as the risks are affordable, manageable and well-calculated. That is why essential risk management is always the key to succeed.

(ii) Technical Incompetence.

Another common mistake is about technical competence which is primarily important for successful capital management business. If you are managing an asset management team but one of your team members has not got sufficient training for the financial dynamics required by the job of investment resource management or proper use of any critical equipment, his incompetence can be a disaster for the whole capital management team. Many management problems or inventory issues may then arise. Therefore for most asset managers, it is always a better idea to manage a smaller but higher quality team than a larger but lower quality team.

(iii) No balance in Asset Allocation.

A good balance in asset allocation is always the key for successful capital management business. A good balance in various investment categories can also minimize your overall financial risks. On the contrary, risks can become unaffordable if there is no balance in investment categories. Such lack of balance, however, can be rectified by improving the skill level of your staff.

(iv) Lack of Effective Updates in Asset Allocation.

If you are really managing a large asset management team, sometimes you may find that effective updates in asset allocation are not always available. The main reason is, while there is job rotation among different team member, certain parts of system updates may not be completely covered. In addition, if too many team members are assigning tasks to others with no updates communicated specifically among all these team members, effective system updates are often not easy to be obtained.

(v) Miscommunication Among Different Departments.

This is another common problem for large asset management firm involving human-related factors among different departments. Such miscommunication can range from as simple as missing one decimal place to getting large discrepancies on system data. This kind of miscommunication is, however, avoidable if one can use suitable instruments to build a better communication system.

(vi) Lack of Support.

Your organization is bound to fail if supports between different departments are not sufficient. Lack of support among various departments is not good for your team performance or proper allocation of assets. Such lack of support, however, can be remedied by reinforcing the ties of your team members through some group-building activities.

(vii) Lack of the Right Technology.

Even you already have all the competent staff you need, if you do not have the right technology that can match properly with their qualifications, you will still not be able to make full use of your competent staff. You may probably not getting too bad performance, but your overall business performance can be significantly improved if you have the right technology that can perfectly match with the skill level of your investment resource management team.

The above 7 mistakes are common for asset management business but they can still be avoided. These information should at least be useful for capital management newbies so that they do not have to learn from lessons or well-known mistakes again.


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