It is very convenient having a financial expert manage your money and assets, especially for those who have difficulty understanding the stock market. Thus, if you know how to do it correctly and are looking for how to start an asset management company, here is everything you should know to build a successful one.
Steps to Start an Asset Management Company
Honestly, it might seem daunting to start an asset management company. Not to mention the number of legal complications that comes along with it. Thus, we at StartEazy are here to make it easy for you.
Get in touch with our experts by filling out the form on your right, and we will help you with all the legal registrations.
Meanwhile, here is the step-by-step process to start an asset management company smoothly.
Step 1 - Research and Planning
Before jumping into a pool, first, you try to figure out its depth. The same goes for starting a business. Therefore, it is crucial to research the industry you are getting into deeply.
For this purpose, here are a few things you need to know to start an asset management company:
What is an Asset Management Company?
An asset management company basically manages different forms of funds for retail clients and invests them in different areas to increase return on investment.
The funds are either invested in stocks, bonds, mutual funds, share market or real estate.
What is the work of an AMC?
The AMC (Asset Management Company) has the asset manager or money managers assigned to each client. They are professionals who evaluate the investment framework and develop the strategy accordingly.
For this purpose, they do the following:
- Allocate the Assets
- Analyze and Research the Market
- Build the Portfolio
- Review the performance
How much is the industry worth, and does it have potential?
The asset management industry is very huge. Moreover, it is expected to grow at a CAGR of 23.78% during the 2022-28 forecast periods. In other words, it will reach USD 1113.53 Billion by 2028.
It means that starting an asset management company is going to give you good returns as it is a promising industry.
How much investment will be required?
An asset management company will require a huge amount of investment. As per the SEBI, you must have at least 50 crores to register as an asset management company.
What are the advantages or disadvantages to clients?
Advantages
- Improvised asset management
- Professionally managed assets
- Wide range of financial services
- Brings economies of scale and buying power
- Statistical report of market analysis
Disadvantages
- Risk of criminal liabilities
- Higher minimum investment required
- Risk of money loss
- High professional fees
- Conflict of interest
Types of Asset Manaagement Company
Asset management companies can be started in many different forms and sizes. From start to finish, the journey of setting up a company will vary depending on the type of company.
The same is true for how you set up your business within your firm. Depending upon how much you set up your company to handle, the complexity of your company will vary.
Micro Asset Management Company
This type of company is often referred to as an umbrella organization.
Within this situation, an asset management company is just acting as a small office for other asset managers who are basically all working under the same business name and are being treated as full-fledged team members.
The best part about this type of arrangement is that it saves time and money for those who feel like trying things out before going all the way.
There are no set-in-stone guidelines for what makes a micro-company.
It can be from one to ten people.
Asset Management Company
It is probably the type of company that most people think of when they hear the term “asset management company.”
The organization can range anywhere from ten to fifty people.
For those who would like to have more than one office, this is also a good choice.
It is also the place where you can begin to branch out.
You can offer support staff and other perks to attract workers with specific skill sets and talents.
Enterprise Asset Management Company
This type of organization has at least fifty employees, but it often has hundreds or even thousands depending upon what it does for work in the industry.
It can be a large undertaking for someone just starting, but it is an excellent way to build up your reputation.
Even if you have fifty or more people working for you, you will still have employees who feel like they do not get enough attention from management.
It is something that many who are at the top of their profession understand and avert.
Step 2 - Business Registrations
Following all corporate formalities, you have to register your business to start an asset management company legally.
In India, you need to obtain a Certificate of Incorporation from the MCA (Ministry of Corporate Affairs).
This certificate confirms that your business is legally established as a private limited company. It also contains details of directors and shareholders.
Step 3 - SEBI Registration and Other Licenses
An asset management company is regulated by the SEBI (Securities and Exchange Board of India). Thus, it has to follow all the legal norms advised by them.
SEBI is also the main authority that deals, supervises, manages and decides how an asset management company will work in India.
Moreover, an asset management company is partially regulated by the AMFI (Association of Mutual Funds of India).
Therefore, an asset management company must have a certificate of recognition from SEBI and AMFI.
Eligibility and Fees for Registration
- The applicant has to pay a non-refundable fee of Rs.1,00,000 to SEBI for registration.
- Portfolio manager must pay Rs.10,000 as registration fees to get the certificate from SEBI.
- The applicant must have portfolio managers having 5+ years of experience in this industry.
- The applicant must have sufficient office space and must submit proof of the same.
- Manager must have a minimum bank guarantee of Rs.50 lacs.
- Portfolio managers must be qualified in accountancy, law, chartered accountancy or professional management from a recognised university.
Validity
The SEBI registration certificate is valid for 3 years. After that, it must be renewed.
Documents Required
- Company Registration Certificate
- MoA (Memorandum of Association) and AoA (Article of Association)
- DIN (Director's Identification Number)
- KYC Documents
- Identity Proof (Passport, Driving License etc.)
- Address Proof (Aadhar Card)
- PAN Card
Once you have completed the following registrations, start setting up your office and do the hiring.
Also, learn more about the things you must keep in your office for good luck.
Summary
Asset Management is a business where having enough good service providers to work with is beneficial.
You must make sure that your team includes those who care about their clients and the assets of their clients first.
