An asset management account is a type of funds management account that makes it possible to combine some of the benefits of a standard checking account with those of an investment account. Funds deposited into the account can be invested by means of a related money market account, while still allowing the account holder access to those funds. With this arrangement, the investor is able to use funds he or she does not need for other obligations to generate some type of return, while still maintaining immediate access to those funds in the event of an emergency.
While there are some differences in how banking and financial institutions structure an asset management account, the most common approach is to credit deposits to the single account that the investors uses to house the funds. On the back end, the bank moves those funds into a money market account, where they are invested on the customer’s behalf. Those funds remain in the money market account until the customer chooses to use a debit card or write a check on the single account. At that point, the needed funds are moved out of the money market account and used to cover the face value of the written check or to honor the amount of the debit card purchase.
There are several benefits associated with an asset management account. Since only a single account is used to make deposits and withdrawals, there is no need for the customer to keep up with several different bank accounts. At the same time, the funds that are moved into a money market account may be invested in instruments like certificates of deposit, stocks, bonds, or mutual funds, generating a higher rate of interest than most interest bearing checking accounts would realize. At the same time, the customer still has ready access to the funds when and as needed, just as if the money were deposited into a standard checking account.
While an asset management account is often an excellent option, there are a few potential drawbacks that should be considered. Most banks offering this type of account do require that depositors maintain a minimum balance in the account at all times. This amount is usually much more than banks require for the establishment of a standard savings account, or even for an interest bearing checking account. In addition, the bank may or may not offer the same access to investment resources that are readily available when using the services of a brokerage house or working with a dealer. Depending on the types of investments that are available through an asset management account, the depositor may have to spend some time and effort researching options before identifying how the funds should be directed into the different opportunities offered through the bank account.
