Asset management: What to know about this fast-growing industry that could increase your wealth

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Asset management is a booming business changing the investment world. Asset managers make investment decisions that aim to increase clients' wealth while concurrently managing risk.

In financial asset management, there are two overarching goals: 1) increasing wealth and 2) keeping risk appropriate (as decided by the client). The professionals who provide this type of service go by titles including wealth manager, registered investment advisor (RIAs), investment manager, portfolio manager, and others.

If you're thinking about hiring an asset manager, here's a summary of what they do, the different types of asset management, and how to find the right one for your money:

Asset managers typically offer their services to a specific set of clients: wealthy individuals, corporations, governments, or institutional investors. They usually allow for more diversification than an investor would be able to get acting on their own. Some asset managers work independently, and others work for a financial institution like a bank or an asset management company.

The types of financial assets they manage include:

The asset-management process varies based on the manager, but there are several common elements. First, the asset manager and the client meet to assess the client's comfort with risk, as well as the types and amounts of assets the client will deposit. They also discuss the roadmap to the client's financial goals with a finanical plan.

When the account is established, the asset manager then researches market trends and financial documentation from corporations to figure out which securities to buy. After the initial purchases, the manager maintains the accounts by trading poor-performing securities for promising ones.

While there are various types of financial asset managers, they're usually certified hired by a client to administer, maintain, and oversee their cash and securities. Many also work with clients in a more holistic way. 

"We don't hold ourselves out to be accountants, lawyers, or financial planners," says Lamar Villere, a partner and portfolio manager at Villere & Co. "But generally, what often happens is we'll take the role of quarterbacking those relationships for somebody." 

Asset managers registered with the Securities and Exchange Commission (SEC) or with their state have a fiduciary duty. That means they're legally required to act in their clients' best financial interest, not their own. 

"I think that there's a lot of mistrust that people have of financial services," says Nicole Renaux, a wealth advisor at Pioneer Wealth Management Group. "It's really nice to be able to take that concern off the table so that clients can receive the best advice available."

If you do hire an asset manager, it's important to make sure they're acting as a fiduciary. Don't just assume that they are based on their title.

Quick tip: To find whether or not your asset manager is a fiduciary, you can look them up on the SEC's website. Search through the Investment Adviser Public Disclosure database to ensure they're registered with the SEC. 

There are several types of asset managers that are helpful to understand. They include:

You can also work with an asset management company (AMC). They create pooled investment funds like mutual funds or exchange-traded funds (ETFs) for investors to buy into. The funds they create are either public or private — with private ones usually being higher risk, less regulated, and limited in terms of who is able to invest.

Asset management companies typically manage brokerage accounts, margin loans, and debit and credit cards from high-net-worth individuals and institutions. Funds deposited into these accounts are often placed into money market funds for greater returns. 

If an asset has value, it needs to be managed. Here are several kinds of asset management outside of the financial world:

Asset managers offer various fee structures, so be sure to check what you'll be charged before working with someone. Most asset managers charge a percentage of the asset they manage. Generally, it's between 1% and 3%, but it may be higher or lower depending on the number of assets in your account.

You could also be charged a brokerage fee, which is a per-trade transaction fee. For example, some online traders have $0 brokerage fees, but others may charge anywhere from $5 to $50 per trade. 

Robo-advisors also charge a percentage of the assets under management. Many robo-advisors, such as Betterment and Wealthfront, charge around 0.25% per year. But it can be more or less depending on the platform and account type. 

Other common fee types are:

There's no universal fee structure used by asset managers, so the genuine cost will vary from manager to manager. 

Quick tip: Check to see if your asset manager lists the fees they charge on their website. This practice shows that the asset manager is transparent and open about what they charge for their services, which is always a good sign.

Account Minimum

$1 ($500 for automated investing)

Fees

$0 for stock trades. 0.25% for automated investing (0.06% to 0.13% for fund fees)

Investment Types

Stocks, fractional shares, ETFs, index funds, and crypto trusts

Account Minimum

$1 ($500 for automated investing)

Fees

$0 for stock trades. 0.25% for automated investing (0.06% to 0.13% for fund fees)

Investment Types

Stocks, fractional shares, ETFs, index funds, and crypto trusts

Wealthfront Investing

Wealthfront is one of the best robo-advisor options if you're in search of low-cost automated portfolio management, and one of the best socially responsible investing apps for features like tax-loss harvesting, US direct indexing, and crypto trusts.

Details

Account Minimum

$1 ($500 for automated investing)

Fees

$0 for stock trades. 0.25% for automated investing (0.06% to 0.13% for fund fees)

Pros

Cons

More Information

Asset managers administer, maintain, and oversee a client's cash and securities in order to increase wealth while managing risk. Financial asset managers can be RIAs, financial advisors, financial planners, investment brokers, or even a robo-advisor.

Asset managers make money by charging clients various fee structures, like asset under management fees, brokerage fees, flat fees, administrative fees, and more. Not all asset managers have the same fee structure, so costs will vary from manager to manager. 

As of June 30, 2023, BlackRock is the largest asset management firm according to data from ADV Ratings. BlackRock has $9.1 trillion in total assets under management and a market capitalization of $104 billion. Vanguard is the runner-up with $7.6 trillion AUM. 

If handling your own money is overwhelming, an asset manager can help organize your assets and grow your wealth. But make sure they're playing on your team. Search the SEC website to make sure they are registered, and therefore a fiduciary. You can also make sure no court judgments or orders have been issued against them.

Finally, discuss any fees before agreeing to work together to make sure you aren't overpaying. Even a fraction of a percent more can cost you a lot over time.

Tessa Campbell

Junior Investing Reporter

Eton Pharmaceuticals Reports Second Quarter 2023 Financial Results

DEER PARK, Ill., Aug. 10, 2023 (GLOBE NEWSWIRE) -- Eton Pharmaceuticals, Inc (“Eton” or “the Company”) (Nasdaq: ETON), an innovative pharmaceutical company focused on developing and commercializing treatments for rare diseases, today reported financial results for the quarter ended June 30, 2023.

“With record product sales, the launch of Betaine Anhydrous, and positive cash flow and earnings, Eton’s second quarter was exceptional. It was the company’s tenth straight quarter of sequential product revenue growth, driven by robust demand and record results for ALKINDI SPRINKLE® and Carglumic Acid. Given their strong performance through the first half of the year, they have increased their revenue expectation and now anticipate reaching approximately $30 million in total revenue this year,” said Sean Brynjelsen, CEO of Eton Pharmaceuticals.

“With attractive growth prospects for their existing commercial products, the targeted 2024 launch of ET-400, and the financial resources to continue adding new products, Eton is very well positioned to deliver long-term growth and achieve their goal of having 10 commercial rare disease products on the market by the end of 2025,” concluded Brynjelsen.

Second Quarter and exact Business Highlights

Tenth straight quarter of sequential growth in product sales and royalty revenue. Eton reported second quarter 2023 product sales and royalty revenue of $6.5 million, representing 175% growth over the prior year period and 22% growth over the first quarter of 2023.

Record sales of ALKINDI SPRINKLE. ALKINDI SPRINKLE saw another record revenue quarter. The Company’s goal is to reach 400 active patients by the end of the year.

Record sales of Carglumic Acid. Carglumic Acid also posted another quarter of record revenue. The product is benefiting from the Company’s recently expanded sales force as well as the launch of Betaine Anhydrous, which shares the same prescriber base and has resulted in increased interactions with metabolic geneticists.

Strong launch of Betaine Anhydrous. Betaine Anhydrous was launched in May and has already seen strong adoption by patients. The Company’s Eton Cares patient support program has received favorable reviews from both patients and prescribers.

Product candidate ET-400 on track for an NDA submission in Q4 2023. The Company is preparing for an NDA submission in the fourth quarter, which could result in an approval and commercial launch in 2024. ET-400 is a proprietary liquid formulation of hydrocortisone that, if approved, would be sold alongside ALKINDI SPRINKLE, and would provide patients with an additional treatment option. The Company believes ET-400 will accelerate patient adoption, with total combined peak sales of ALKINDI SPRINKLE and ET-400 expected to exceed $50 million annually.   

Monetized royalty interests and strengthened financial position. During the quarter, Eton sold its remaining milestone and royalty interests in ZONISADE®, EPRONTIA®, and the lamotrigine product candidate. In exchange for its interests, Eton received a payment of $5.5 million, which it intends to reinvest in the acquisition of rare disease products. In the second quarter, the company also received a $0.8 million break-up fee associated with its participation as the stalking horse bidder in an auction process. The Company finished the quarter with $21.6 million of cash and cash equivalents.

Second Quarter Financial Results

Net Revenue: Net sales for the second quarter of 2023 were $12.0 million compared with $7.4 million in the prior year period. Net sales included $5.5 million of licensing payments received during the quarter related to the sale of Eton’s neurology product royalties and milestones to Azurity Pharmaceuticals, compared to $5.0 million of licensing revenue in the prior year period related to the sale of multiple hospital products to Dr. Reddy’s.

Product sales and royalty revenue were $6.5 million for the second quarter of 2023 compared with $2.4 million in the prior year period, an increase of 175% over the prior year period and 22% over the first quarter of 2023. The year-over-year increase in product sales and royalty revenue was primarily driven by growth in ALKINDI SPRINKLE and Carglumic Acid tablets.

Gross Profit: Gross profit for the second quarter of 2023 was $9.7 million compared with $4.6 million in the prior year period. The growth was driven by the sale of the Company’s neurology product royalties as well as growth in ALKINDI SPRINKLE and Carglumic Acid. Gross profit for the prior year period included $1.8 million of non-cash expenses related to the hospital products divestment.

Research and Development (R&D) Expenses: R&D expenses for the second quarter of 2023 were $1.1 million compared to $0.7 million in the prior year period. The increase was primarily due to a $0.5 million milestone payment resulting from the successful manufacturing of registration batches of product candidate ET-600.

General and Administrative (G&A) Expenses: G&A expenses for the second quarter of 2023 were $4.7 million compared to $5.3 million in the prior year period. The decrease in G&A expenses was mainly due to decreased FDA fees and legal fees associated with products sold to Dr. Reddy's in June 2022.

Net Income: Net income for the second quarter of 2023 was $4.6 million or $0.18 per basic and diluted share compared to a net loss of $1.6 million, or $0.06 per basic and diluted share in the prior year period.

Cash Position: As of June 30, 2023, the Company had cash and cash equivalents of $21.6 million.

Conference Call and Webcast Information

As previously announced, Eton will host its second quarter 2023 conference call as follows:

In addition to taking live questions from participants on the conference call, management will be answering emailed questions from investors. Investors can email questions to: investorrelations@etonpharma.com.

The live webcast can be accessed on the Investors section of Eton’s website at https://ir.etonpharma.com/. An archived webcast will be available on Eton’s website approximately two hours after the completion of the event and for 30 days thereafter.

* Conference call participants should register to obtain their dial-in and passcode details. Please be sure to register using a valid email address.

Forward-Looking Statements

Statements contained in this press release regarding matters that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements associated with the expected ability of Eton to undertake certain activities and accomplish certain goals and objectives. These statements include but are not limited to statements regarding Eton’s business strategy, Eton’s plans to develop and commercialize its product candidates, the safety and efficacy of Eton’s product candidates, Eton’s plans and expected timing with respect to regulatory filings and approvals, and the size and growth potential of the markets for Eton’s product candidates. Because such statements are subject to risks and uncertainties, genuine results may differ materially from those expressed or implied by such forward-looking statements. Words such as "believes," "anticipates," "plans," "expects," "intends," "will," "goal," "potential" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon Eton’s current expectations and involve assumptions that may never materialize or may prove to be incorrect. genuine results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties, which include, without limitation, risks associated with the process of discovering, developing and commercializing drugs that are safe and effective for use as human therapeutics, and in the endeavor of building a business around such drugs. These and other risks concerning Eton’s development programs and financial position are described in additional detail in Eton’s filings with the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made. Eton undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

About Eton Pharmaceuticals

Eton is an innovative pharmaceutical company focused on developing, acquiring, and commercializing innovative products to address unmet needs in patients suffering from rare diseases. The Company currently has three commercial rare disease products, ALKINDI SPRINKLE® for the treatment of pediatric adrenocortical insufficiency, Carglumic Acid for the treatment of hyperammonemia due to N-acetylglutamate synthase (NAGS) deficiency, and Betaine Anhydrous for the treatment of homocystinuria. The Company has four additional product candidates in late-stage development: dehydrated alcohol injection, which has received Orphan Drug Designation for the treatment of methanol poisoning, ZENEO® hydrocortisone autoinjector for the treatment of adrenal crisis, ET-400 for the treatment of adrenocortical insufficiency, and ET-600 for the treatment of diabetes insipidus. For more information, please visit their website at www.etonpharma.com.

Investor Relations:Lisa M. Wilson, In-Site Communications, Inc.T: 212-452-2793E: lwilson@insitecony.com

Eton Pharmaceuticals, Inc.Condensed Statements of Operations(In thousands, except per share amounts)(Unaudited)

Eton Pharmaceuticals, Inc.Condensed Balance Sheets(in thousands, except share and per share amounts)

Eton Pharmaceuticals, Inc.Condensed Statements of Cash Flows(In thousands)(Unaudited)