Asset Management Vs. Investment Banking: Differences

Updated 30 September 2022

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Asset management and investment banking aim to make decisions that help clients manage their portfolios and earn profits. While these two finance professions might seem similar, they are different in many ways. Learning about the key differences between these two career options can help you make an informed decision. In this article, we define asset management vs. investment banking and list several differences between asset management and investment banking, including types, importance and skills.

Definition Of Asset Management vs. Investment Banking

It is essential to compare asset management vs. investment banking to understand which career to pursue:

What is asset management?

Asset management is the process of helping clients develop, operate, maintain and cost-effectively sell assets. The primary goal of asset management is maximising the overall value of the client's investment portfolio while maintaining an acceptable level of risk. Businesses and individuals pay asset managers to maintain their investment portfolios. These managers can handle both tangible and intangible assets. This process helps a company determine whether they maintain the acquired assets until their useful life expires, replace them to enhance production and increase their quantity.

Successful asset management considers the risk and preferences of each client before creating an investment portfolio. Some common roles in asset management include:

Financial analyst. Financial analysts are professionals who analyse financial data, make smart buying and selling decisions and research market conditions to support their decisions.
Asset managers. These are finance professionals who create, analyse and handle a client's financial portfolio. They work on specific asset investments, such as stocks, fixed income securities, real estate and exchange-traded funds and help clients make the best possible investment decisions.
Economist. An economist is a finance professional who studies the relationship between society and how it uses resources. These professionals help identify and understand the reasoning behind people's financial decisions.

What is investment banking?

Investment banking is a part of the banking operations that helps companies, governments and organisations raise additional capital by performing transactions like mergers and acquisitions. The primary goal of investment banking is to provide clients with financial services to uphold ethical financial practices. An investment banker advises clients on investments, creates financial models, conducts research and prepares recommendations related to investing. Investment bankers help companies with mergers and acquisitions and risk management.

Also, investment banks underwrite equity securities and new debt for all types of corporations and advise companies regarding the placement of stock and issues. Some common roles in investment banking are:

Investment banking analyst. These professionals research investment opportunities and oversee client transactions to ensure clients make intelligent investment decisions. They review financial data for companies and weigh risks to understand whether it is profitable for the client to invest in a company.
Investment banker. Investment banker makes money for their clients. They offer advice and consultation on securities like stocks and bonds and help understand what price to set for each security and when is the right time to buy and sell those securities.
Investment underwriter. Investment underwriters are professionals who coordinate and help a company in its initial public offering (IPO) and identify ways to raise capital for a corporation. Based on the investor's needs, these professionals conduct negotiations to get maximum profits from any investment.

Difference Between Asset Management vs. Investment Banking

Some critical differences between asset management and investment banking are:

Buy-side vs sell-side

One significant difference between asset management and investment banking is whether they are on the sell-side or the buy-side of the financial market. Typically, asset management is on the buy-side, whereas investment banking is on the sell-side of the financial market. The buy-side of the financial market focuses on buying securities, while the sell-side focus on issuing and selling securities. Also, both sides of the financial market interact with each other.

Importance

Asset management is important for a client because it:

Helps in understanding the status and condition of existing assets
Monitors in asset depreciation
Obtains maximum profit from existing assets
Safeguards funds and assets
Chooses investment in a suitable asset

Investment management is important because of the following reasons:

Works as a financial advisor to companies and organisations
Provides help in sales and trading that occurs between buyers and sellers
Helps businesses price securities resulting in the maximisation of revenue
Meets regulatory requirements while raising capital

Types

Here are some different types of asset management:

Financial asset management. Financial asset management involves managing hedge funds, real-estate holdings and investment accounts. It primarily involves tracking market rates, tax responsibilities and other liabilities such as debt and interest.
Fixed asset management. This focuses on tracking and managing the fixed assets of an organisation or client. It helps in loss prevention and financial accounting.
Public asset management. This type primarily focuses on managing public assets such as schools, parks, community centres and airports.
Infrastructure asset management. This asset management focuses on public infrastructures such as bridges, highways, waterways and power grids. It primarily involves maintaining, updating and removing these vital utilities.

Here are some different types of investment banking:

Regional boutique. Regional boutiques are smaller in size and work with fewer than a dozen customers. These investment bankers specialise in a single area.
Elite boutique. They provide high-value deals and work with multiple offices in the country. They are similar to bulge bracket banks.
Bulge bracket. They are multinational investment banking firms. These investment banks work with large clients and deals.
Middle market. Though these firms have a larger presence than the regional boutique division, they do not enjoy a global presence.

Responsibilities

While some job responsibilities of asset managers and investment bankers might overlap, these two-career paths offer different responsibilities. Asset managers primarily focus on portfolio management and help clients manage their investments and assets. Some common responsibilities of asset managers can include:

Prepare risk analysis and asset management reports
Create, organise and manage a client portfolio
Create strategies to increase ROI and minimise risk factors and losses
Analyse financial and economic market conditions to advise clients on the right buying and selling time
Discuss asset management and its strategies with clients
Collaborate and work with the asset management team and senior executives

Some common responsibilities of an investment banker can include:

Issue trade and debt-equity to increase capital
Oversee merger and acquisition
Conduct research and review financial information and market trends
Examine financial risks and give financial advice
Supervise IPO and private equity settlements
Research and analyse financial market conditions

Skills

Investment bankers work on the sell-side and are responsible for selling financial products, while asset managers work on the buy-side, buying the products that bankers sell. Usually, investment bankers require more sales talent along with the ability to speak persuasively and establish rapport with clients. They also require a strong quantitative insight and in-depth understanding of the market. Employers expect investment bankers to have excellent negotiation and persuasion skills, along with excellent communication skills. Asset managers require more analytical and quantitative skills. These professionals require the ability to track markets and spot lucrative investment opportunities.

Clients

The type of client these professionals work on is another differentiating factor between the two professions. Investment bankers usually work with corporate clients and the government and help them with mergers and acquisitions and raising additional capital. On the other hand, asset managers work with wealthy individual clients and organisations and help them manage their investment portfolios. Based on the investment need of every client, these professionals make the best investment decisions.

Work-life balance

Another difference between investment banking and asset management is the work-life balance fostered by each career path. Typically, investment bankers are known for working strenuous schedules and spend more than 60-70 hours per week. Asset managers are likely to work a maximum of 50 hours per week. Individuals in both careers may sometimes work on weekends and travel as a part of their job. Though the work-life might be challenging, both professions offer an incredible learning experience.