Saving and investing

Many banks provide the customers with asset management services. Roughly speaking, there are two types of asset management services: consultative and discretionary asset management. Asset management services are always additional services the customer pays for. The fact that a customer has a book-entry account or fund unit investments with a bank or investment firm does not alone obligate the company to manage the customer’s investments.  Normally, the customer makes their own investment decisions.

Consultative asset management

Consultative asset management means that the bank issues recommendations to the customer regarding investments to be made but the customer takes the final decision to invest or not. In the beginning, the bank and the customer sign an asset management contract and agree on the risk level acceptable to the customer as well as on the expected returns.

Asset management services do not provide guarantees of reaching the return objective but the customer will have the expert advice from the professionals employed by the bank or investment firm and then make the investment decisions on the basis of information that is superior to their own expertise. Despite using asset management services, the customer may lose the invested capital because even the best expert cannot give a 100% reliable forecast of the trend in the investment market.

Discretionary asset management

Discretionary asset management means that the customer hands over their investment assets to be managed by the bank or investment firm. The asset management contract contains an understanding on the investment strategy and confirms the risk and return levels acceptable to the customer. In discretionary asset management, the customer does not take individual investment decisions but the bank of the investment firm see to the investing of the assets in line with the understandings contained in the contract. However, the customer has the responsibility of actively following the reports issued by the asset manager, showing the investments made and the value of the invested assets.

Should the customer notice something in the investment activities, in their mind contrary to the agreed strategy of the asset management contract, they should make a complaint to the asset manager as soon as possible. Normally, the asset management contracts include a clause regarding the complaint times within which the customer should make a complaint regarding a problem noticed.

Discretionary asset management does not guarantee the materialisation of the expected returns, not even the retaining of the invested capital. The risks inevitably associated with investing may materialise, despite expert-level asset management, and the customer may incur capital losses. Discretionary asset management is often organised so that the investments are made in line with a model portfolio make and maintained by the bank’s experts. In any given market circumstances, the experts make justified amendments to the model portfolio, based on their best knowledge.