Definition.

[Michael]

Hi.

Can someone kindly explain the difference between 'investment banking',
'wealth management' and 'asset management'?
The last two terms seems the same. What is the subtle difference here?

Thanks

 

[Ronald Raygun]

Can someone kindly explain the difference between 'investment banking',
'wealth management' and 'asset management'?
The last two terms seems the same. What is the subtle difference here?

Funny how you can always tell when College Term has started.

 

[Michael]

It's not for college whatsoever. Sorry, your assumption is wrong, but I'll
give you credit for trying to be smart.

Read an article on the structure of a financial corp. and there were figures
for these different departments.
So I'm just wondering whats the difference.

Ronald, care to explain?
Thanks

 

[Ronald Raygun]

It's not for college whatsoever. Sorry, your assumption is wrong, but I'll
give you credit for trying to be smart.

Read an article on the structure of a financial corp. and there were
figures for these different departments.
So I'm just wondering whats the difference.

Ronald, care to explain?

Sorry, no. I'd just be guessing.

 

[Nick Bennett]

Hi.

Can someone kindly explain the difference between 'investment banking',
'wealth management' and 'asset management'?
The last two terms seems the same. What is the subtle difference here?

I could be talking out or my ass (and I'm willing to be accused of such)
but the definition may simply depend on who you talk to.

I would make a distinction though:

Wealth is accumulated "stuff". It can be cash, bonds, real estate,
shares, intellectual property rights etc etc etc.

Assets are those aspects of my wealth that ADD to my wealth. For instance
a big house is part of my wealth but isn't an asset (it COSTS money to
own, so it's a Liability). A high-interest savings account on the other
hand is an asset because it ADDS money to the pot. A house might become
an asset however if it rises in value sufficiently so that I can sell it
on at a profit.

That's based purely on limited reading on the subject, but it make sense
to me.

As for Investment Banking, not sure since I've never read anything about
it

Cheers

Bennett

 

[Michael]

Thanks Nick for your input.

The definition of asset in Oxford Dictionary is

asset
· n.
1 a useful or valuable thing or person.
2 (assets) property owned by a person or company, regarded as having value
and being available to meet debts, commitments, or legacies.

- ORIGIN C16 (in the pl. in the sense 'sufficient estate to allow discharge
of a will'): from Anglo-Norman Fr., from OFr. asez 'enough', based on L. ad
'to' + satis 'enough'.
[Unquote]

Seems like the big house (property) is regarded as an asset.

Now I'm as curious as a cat.
Any kind investment banker care to explain?
ermmm .. kind banker?? Probably non-existent. LOL

 

[Rob Graham]

Assets are those aspects of my wealth that ADD to my wealth. For instance

a big house is part of my wealth but isn't an asset (it COSTS money to
own, so it's a Liability). A high-interest savings account on the other
hand is an asset because it ADDS money to the pot. A house might become
an asset however if it rises in value sufficiently so that I can sell it
on at a profit.

Nonetheless, a house is generally regarded as an asset and the Inland
Revenue would expect you to include it in a list of assets if you came to
fill in a form where this information was required - an IHT form for
example. Your definition would imply that shares are not assets because they
can go down.

Rob Graham

 

[Nick Bennett]

Nonetheless, a house is generally regarded as an asset and the Inland
Revenue would expect you to include it in a list of assets if you came to
fill in a form where this information was required - an IHT form for
example.

No doubt )

Your definition would imply that shares are not assets because they

can go down.

Indeed, shares will only be assets if they are making you money. Better
to think of them as a portfolio/vehicle of certain selected shares than
"shares" per se.

I found the definition in a book about wealth-creation and management.
The author wanted to make the definition of the word clear in his book,
since in his eyes the best way to create wealth was to use assets to
purchase other assets. I appreciate that the definition isn't one that's
used usually, but then he said that was part of the problem: people were
confusing liabilities with assets and not making the most of their wealth.
Buying a house to live in makes it a liability, buying a house to rent out
at a rate that covers your mortgage repayments (if any) with a profit
makes it an asset (you can use the income to buy more houses, start up a
business, etc etc).

Whether the definitions "Wealth management" and "Asset management" under
discussion have anything to do with this is another matter

FWIW...

Bennett

 

[Tim]

I found the definition in a book about wealth-creation and management. ....
Buying a house to live in makes it a liability,

Nope - that'd be the *mortgage*. Often when buying a house, people end up
with both an asset (the house) and a liability (the mortgage). You
shouldn't confuse the two!

... buying a house to rent out
at a rate that covers your mortgage repayments (if any) with a profit
makes it an asset

Nope - the house is no different whether you live in it, or someone else
does. It's always an asset.

 

[Stephen Burke]

Can someone kindly explain the difference between 'investment
banking', 'wealth management' and 'asset management'?
The last two terms seems the same. What is the subtle difference here?

It may well depend on the usage of a particular organisation, but it's quite
likely that wealth management refers to services for individual wealthy
clients, whereas asset management is bulk fund management, e.g. unit trusts.
Investment banking generally refers to services relating to large companies,
e.g. issuing corporate bonds.

 

[Stephen Burke]

Nope - that'd be the *mortgage*. Often when buying a house, people
end up with both an asset (the house) and a liability (the mortgage).
You shouldn't confuse the two!

I'll beat John Boyle to it and point out that the mortgage itself is the
charge on the property, and that's only a contingent liability (if you default
on the loan).

 

[Tim]

I'll beat John Boyle to it and point out that the mortgage itself is the
charge on the property, and that's only a contingent liability (if you default
on the loan).

What would you rather I called the 'mortgage loan'? How about 'Arnold'??
;-)

 

[Michael]

Thanks Stephen. I'm buying your explanation.
Thanks guys....for sharing your views.

Who says internet is all porn and no education? Ok.... back to porn now.
LOL... j/k!

 

[Nick Bennett]

Nope - that'd be the *mortgage*. Often when buying a house, people end up
with both an asset (the house) and a liability (the mortgage). You
shouldn't confuse the two!

What about the heating, council tax, water rates, repairs....

....all part and parcel of owning the property. All costing you money. If
you sell the property you don't have those outgoings, making it a
liability, even without a mortgage ;-)

Yeah, I'm being picky, and not using the word in its usual sense, but I'm
keen on thinking of things in terms of "will this cost money to own or
make money if I own it?" Asset or liability.

Nope - the house is no different whether you live in it, or someone else
does. It's always an asset.

It's always "something you can sell for money", it's not usually
"something that gives you an income". Like I said in my first post, the
definition of words like asset and wealth will "depend on who you ask"! I
offered mine ;-) I didn't say they were right.

When you draw up an asset/liability/income/expenditure quadrant, putting
your family house in the "asset" quarter will really really screw up your
money management. If you had a shares portfolio that was costing you
several hundred pounds a month to support you'd dump it pretty quickly I
imagine. The house of course has other uses (like keeping rain off your
head).

It's just down to terminology - if you tell a woman she's just had a
spontaneous abortion she might get shirty and tell you she actually had a
miscarriage. Same words in different usage. Most people will use asset
the normal way, I'll use it my way, at least in my head

Cheers

Bennett

 

[Ronald Raygun]

What about the heating, council tax, water rates, repairs....

...all part and parcel of owning the property.

Wrong. Repairs apart, all the things you mention are part and
parcel of living in a house, not of owning it. You would still
pay them if renting, and even repairs, though paid for by the
owner, are indirectly paid for by the tenant by virtue of the
rent including an allowance for them.

Yeah, I'm being picky, and not using the word in its usual sense, but I'm
keen on thinking of things in terms of "will this cost money to own or
make money if I own it?" Asset or liability.

I don't think that's a correct distinction. Next you'll be telling us
that money under the mattress is a liability because it loses value
through inflation. It remains an asset because you can spend it
whenever you like. Something you own and which has value is an asset
irrespective of whether it makes you money or loses you money. The
distinguishing feature of an asset is that it has positive value, even
though it may be latent (locked in) and in need of specific action
(such as selling it) to release it. A liability is simply an "asset"
with negative value.

It's always "something you can sell for money", it's not usually
"something that gives you an income". Like I said in my first post, the
definition of words like asset and wealth will "depend on who you ask"! I
offered mine ;-) I didn't say they were right.

It generally help to speak the same language, though. It's all very
well to use private terminology like Arnolds, but if nobody else
knows you're talking about mortgages, then mayhem results. You may
as well call a spade a shovel.

It's just down to terminology... Most people will use asset
the normal way, I'll use it my way, at least in my head

I'd agree that it's useful to think of things in terms of whether they
generate money or other kinds of wealth, or whether they lose you money.
What is wrong is to assign the terms "asset" and "liability" to them
on that basis, when they already mean something else.

Besides, a house you own, though it may cost you money, also saves
you the money you'd otherwise have to spend on rent. Chances are
it saves you more than it costs you. Otherwise nobody would choose
to own, nor would anyone but a philanthropist choose to be a landlord.

 

[Tim]

What about the heating, council tax, water rates, repairs....

Yep - *they* are all liabilities. *Not* the house.
Of course, if no-one is living there, then (most of) these will disappear.
So they are not related to *owning* the house, but to *living in* it.

...all part and parcel of owning the property.

Nope - "part&parcel" of *living* there! (not owning it)

All costing you money.

That's why they (the (bills*) are called liabilities. :-(

If
you sell the property you don't have those outgoings, making it a
liability, even without a mortgage ;-)

Nope - the bills are liabilities, the house is an asset. Pure & simple!

Yeah, I'm being picky, and not using the word in its usual sense, but I'm
keen on thinking of things in terms of "will this cost money to own or
make money if I own it?" Asset or liability.

Fair enough - so call them "income-producing assets" or "non income
producing assets". They are both assets!

It's always "something you can sell for money", it's not usually
"something that gives you an income". Like I said in my first post, the
definition of words like asset and wealth will "depend on who you ask"! I
offered mine ;-) I didn't say they were right.

Well why not call them George & Fred then?

When you draw up an asset/liability/income/expenditure quadrant, putting
your family house in the "asset" quarter will really really screw up your
money management.

No it won't - because I know what I'm doing!

If you had a shares portfolio that was costing you
several hundred pounds a month to support you'd dump it pretty quickly I
imagine.

Well actually, probably not. If pumping in "several *hundred* pounds a
month" actually made the VALUE of the shares increase by "several *thousand*
pounds a month", then I'd certainly *not* be getting rid of them in a hurry,
if I could help it!

Consider the following two "assets" (proper definition!) :-
(1) An asset that requires an influx of £100 per month, but which
increases in value by £1,000 per month; (I guess you'd call this a
"liability"!)
(2) An asset that produces an income of £100 per month, but falls in value
by £1,000 per month;

I would *much* rather have (1) than (2) above, but it appears that you'd
prefer (2)!!! Care to explain why?

 

[Ronald Raygun]

Yep - *they* are all liabilities. *Not* the house.

Eh? What happened to the distinction between expenditure and liability?

Well why not call them George & Fred then?

That's the spirit! So an Arnold is a Fred, right?

 

[Tim]

Eh? What happened to the distinction between expenditure and liability?

They are liabilities before they are paid, are they not??

That's the spirit! So an Arnold is a Fred, right?

Yep. Just don't call Don "Fred", 'cos he's really friendly....

 

[Ronald Raygun]

They are liabilities before they are paid, are they not??

I wouldn't have thought so, except in the sense that they remain
such even after they are paid.

 

[Nick Bennett]

Wow - opened a can of worms here )

Yep - *they* are all liabilities. *Not* the house.
Of course, if no-one is living there, then (most of) these will disappear.
So they are not related to *owning* the house, but to *living in* it.

I'll concede that they're mostly due to living there, but most people buy
a house to live in yet still call it an asset, whereas I wouldn't
(necessarily). But I'd call bills expenditure not liabilties.

Fair enough - so call them "income-producing assets" or "non income
producing assets". They are both assets!

Probably an easier way to explain the concepts, adding in "loss producing
assets" as well. Buying petrol is purchasing a non-income producing asset
(it just gets used up) whereas buying a car is loss producing (assuming
you fill it with petrol periodically, sincethe act of owning it creates
more expenses (the cost of buying petrol, among other things).

Well why not call them George & Fred then?

That would just be confusing

No it won't - because I know what I'm doing!


Well actually, probably not. If pumping in "several *hundred* pounds a
month" actually made the VALUE of the shares increase by "several *thousand*
pounds a month", then I'd certainly *not* be getting rid of them in a hurry,
if I could help it!

Consider the following two "assets" (proper definition!) :-
(1) An asset that requires an influx of £100 per month, but which
increases in value by £1,000 per month; (I guess you'd call this a
"liability"!)
(2) An asset that produces an income of £100 per month, but falls in value
by £1,000 per month;

I would *much* rather have (1) than (2) above, but it appears that you'd
prefer (2)!!! Care to explain why?

You've got me wrong. Asset 1 has a net increase in wealth of 900 per
month, so it's a true income-producing asset. Asset 2 is a loss-producing
asset, much like owning a house is for some people (it increases in
capital value gradually, so adding to your wealth, but drains your income
at a faster rate). The mechanics of interest repayments make that a
certainty a lot of the time ;-) I always work out that _actual_
repayments to be the total %age in interest rather than look at APRs.
Seeing a loan repayment of 200-250% of what I want to borrow certainly
makes me think twice about getting into debt casually.

I suppose I should have been more specific in the example: pumping in
several hundred pounds a month to support, say, a short sell of a bunch of
shares that were rising in price and you had to either buy out (and
"realise" your loss) or meet the margin call and, er, pray.

Besides, something like Asset 1 looks like the sort of asset that you
could leave alone and skim off the profits to buy more assets. Let your
money work for you, rather than you having to work for your money!

Bennett