What are External Asset Managers?

What are External Asset Managers?

External Asset Managers (EAM), well-known as the Independent Asset Managers, continue to grow in Singapore. Its start dates back to Europe, and from there, many countries have welcomed the idea of having EAMs. Singapore’s market is doing great hence the increase of wealth. As a result, many people are open to new ways of managing their wealth.

What are EAMs?

External asset managers give clients the freedom to place their wealth to the bank of their choice, or the EAM may recommend it. Clients provide the EAM with the power of attorney and the authority to represent them. It is responsible for managing the asset allocation and investment portfolio. Some external asset managers may come with the bank they use to deliver services smoothly. Note that the money will remain in the client’s name at all times, but the decision-maker is the EAM.

Licensing of EAM in Singapore

EAM never holds the clients’ assets since it is placed in the custodian bank and under the client’s name. However, the Singapore laws consider the EAM as a fund management sector. Their primary role is to provide the clients with advice on investment decisions, strategies and offer fund management services. Fund Management in the Singapore Regulatory Framework runs under the Securities Futures Act, which includes management of capital and foreigners’ contracts on behalf of clients.

Since EAMs offer fund management services, they fall under Singapore Management companies hence can either be a Registered Fund management company or Licensed Fund Management Companies. The kind of license you get depends if the EAM falls under the RFMC or LFMC category.

Requirements for Registrations as an LFMC or RFMC company

There are several requirements you must keep in mind when applying for the correct license

• The assets available must be at least S$250 million for LFMC and at most S$250 million for the RFMC registration
• The two divisions require at least two directors with over five years of experience, with one of them residing in Singapore
• At least two professionals with a minimum of five years of experience and both live in Singapore
• LFMC has no limitation to the number of investors, but RFMC can only have at most thirty investors
• RFMC doesn’t require risk management capital, while LFMC needs 120% of the operational risk capital

Charges of an External Asset manager

EAMs charge customers the fund management and assets advisory fees. Some banks give commissions depending on the number of trades under a client’s account, which is well-known as the retrocession fees. However, some of the EAMs don’t encourage the commission to ensure that nobody takes advantage of the clients. For instance, an EAM taking unnecessary moves to increase the number of transactions for the money. This incident is unfair to the clients; hence some EAMs don’t trust such methods when offering their services.

Conclusion

The Singapore market is progressing at a high rate hence building up wealth, which is where the external asset managers come to the rescue. They are responsible for the clients’ wealth, ensuring that all the investment moves are strategic and beneficial. Also, EAMs comes in handy in fund management.