Asset Management Accounts for Beginners

The Solution to your Banking and Brokerage Needs

Asset Management Accounts
Asset management accounts are a type of consolidated bank and brokerage account that can hold FDIC insured cash reserves, stocks, bonds, mutual funds, ETFs, REITs, and more. Pgiam / E+ / Getty Images

Between your checking, savings, money market, and investment needs, the paperwork can be overwhelming. Have you ever wished you could combine them all into one hybrid account at a single institution? Thanks to the invention of asset management accounts, this is not only possible but can be easily accomplished in a single afternoon.

The History of Asset Management Accounts

Following the stock market crash of 1929, Congress passed the Glass-Steagall Act.

The legislation banned the consolidation of banking and securities firms in order to better protect the public in the event of another major catastrophic financial event. The result was that investors had to maintain separate accounts at different institutions. In 1999, then-President Bill Clinton signed the Gramm-Leach-Bliley Act into law. It effectively overrode the Glass-Steagall Act and permitted the creation of “financial services” firms that offered banking, brokerage and insurance services to customers. Shortly thereafter, these financial services companies began offering asset management accounts as a solution to their customers' needs.

How Asset Management Accounts Work

An investor deposits money into his or her asset management account. The balance is swept into a money market fund (where earns a higher rate of interest than a regular checking account would) until the account holder writes a check, uses the debit card to make a purchase or withdrawal cash at an ATM, or purchases stocks, bonds, mutual funds or other financial instruments.

At the end of each month, the account holder receives a consolidated statement detailing the checks posted, deposits made, investments owned, transaction history, dividends and interest received, and more.

Some asset management account offer periodic investment programs which allow for automatic purchases of mutual funds on a regular basis to take advantage of the power of dollar cost averaging, dividend reinvestment plans, systematic withdrawal plans (which can be perfect for those in retirement or who needs to receive a portion of their money on a regular basis), and direct deposit service.

Because the minimum balance is often respectable (the low end tends to be around $15,000), many automatically qualify for margin privileges.

The Pros of Using an Asset Management Account

  • Consolidated monthly statement that makes keeping track of your financial activity much easier.
  • Unlimited check writing with money market sweep, helping generate more interest income for the account holder.
  • Many firms offer asset management accounts with both discount and traditional brokerage models.

The Cons of Using an Asset Management Account

  • The research of many banks that offer asset management accounts has not yet caught up to that offered by brokerage firms. This will likely change with time.
  • Small investors that cannot meet the minimum opening balance of $15,000 are not eligible.
  • Many financial services charge small monthly or quarterly maintenance fees unless the asset balance exceeds $100,000.