Asset Management Accounts

When you start investing, you might find it begins to get difficult to manage each of your financial accounts.  Suddenly, you go from having a checking and savings account to probably having both of those, and a mixture of money market accounts, mutual funds and/or stocks.  Managing everything can be a bit of a nightmare- and so the financial geniuses have come up with asset management accounts to simplify things.

What Are Asset Management Accounts?

When you have an asset management account, you then make all of your bank deposits into it.  The money is placed into a money market fund and earns a higher interest rate than a traditional checking account would, and it remains there until you decide to purchase investments, write a check, or take money out of an ATM.  Each month, you'll receive a statement that includes detailed transaction histories of all checks posted, the amount of the deposits made, dividends and interest received, and what investments are owned.

Instead of having a checking account to write checks, a savings account to set money aside, and then multiple accounts for each of your investment opportunities, the asset management account acts as all of those separate accounts.

Advantages of Asset Management Accounts

Obviously, the main advantage of having an asset management account is that it becomes easier to keep track of your finances.  Everything is handled out of one single account, and the monthly statements show details for every aspect of your finances. 

Having the money you deposit placed into money markets mean that you receive higher interest on your income, and asset management accounts allow for unlimited check writing which is always convenient. 

When you use an asset management account to handle your finances, you still get to choose whether or not you want to use a discount or tradtional brokerage model.

Disadvantages of Asset Management Accounts

Individuals who are just starting out, and don't have a lot of money to invest are not eligible.  Asset management accounts require a minimum opening balance of $15,000 to get started.  Additionally, the majority of asset management accounts require that account holders maintain a $100,000 balance or they get charged monthly or quarterly maintenance fees.

Another disadvantage of using asset management accounts is that they haven't yet reached the level of research services that a traditional brokerage service would offer. 

The History of Asset Management Accounts

In 1929, after the stock market crash, the consolidation of financial accounts (banking and securities firms) was banned under the Glass-Steagall Act.  This was meant to protect individuals and families should another crash occur.  Investors had to have multiple accounts with a number of different financial institutions.

In 1999, however, President Clinton decided to override the Glass-Steagall Act by passing the Gramm-Leach-Bliley Act as law.  This act made it legal for financial service firms to offer a variety of financial accounts under one roof, so banking, insurance and brokerage accounts were offered from a single provider to consumers.  A short time after this became legal, the financial services firms decided to create asset management accounts to allow investments to become part of the single account solution.