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Trust Management vs PAMM


Trust Management as a Type of Passive Earnings


In the many countries, the banking sector was, and still remains, the most common investment segment. The share of bank deposits in an investor’s portfolio, however, is getting smaller every year. Indeed, there used to be much more faith in bank deposits and their profitability, but problems in the banking system of a number of states significantly shook people's confidence in banks. People became less willing to transfer their funds to banking institutions and became actively engaged in the search for new ways to increase funds.

Trust management became one of these ways, which, non-accidentally, has recently been readily offered by banks, too. However, this type of investment has become more widespread among participants in the financial market. In other words, as soon as Forex market entered the lives of people, so immediately more people came to invest in trust management. Let's talk about what this type of passive earnings is about and what its advantages and disadvantages are.

Trust management


Trust management today means the type of financial service provided by a bank, management company or other financial institution operating in the securities market, foreign exchange, stock or other asset markets. It is supposed to temporarily transfer funds to the management company in full or in part (often to a specific person, when it comes to working on Forex), with the goal of maximally beneficial work for the investor, bringing regular income.

It should be understood that the funds remain the property of the investor and the authorized person only has the right to dispose of them. The investor receives his share of the profit from the success of operations with the means of operations, and the person managing the finances receives a percentage of the work done.

Remote Control Forms


If we talk about the forms of trust management, then in a generalized sense there are two of them: individual and collective.

Individual remote control involves the transfer of funds of a particular person to the manager for subsequent work. This cooperation takes place, roughly speaking "one on one", based on the agreed conditions in the contract. As a rule, with this type of cooperation, the investor has the right to indirectly influence the activities of the manager, stipulating the trading strategy, the maximum level of drawdown, etc. Of course, in this case, the minimum amount of investment for individual trust management will be significant, because, in fact, the managing trader spends all his time on one person, adjusting to his desires. Therefore, the level of remuneration will also be considerable.

The collective management system differs from the previous type in that several persons become investors at once, accumulating their funds together and transferring them to a specific manager. The profit from such activities is divided directly in proportion to invested funds of the investors and the manager also receives a percentage for his work. The standard PAMM scheme is a perfect example of this form. And as far as we all understand, joining PAMM as an investor is an easy task that is not financially expensive.


Let's move away from the general types of trust management and consider its forms.

Differences between remote control and PAMM accounts


We have already decided that PAMMs, by their idea, are a type of trust management, or rather, its collective form. Nevertheless, these two types of passive earnings are the most common today and it is worth voicing their main differences, which will help the person concerned to choose the best option for passive income.

Perhaps the most significant difference between the remote control and PAMMs is a high entrance to the project. Again, if we are talking about experienced traders who have a reputation for being reliable and solvent. And here it is worth noting that the remote control service is offered by both companies with many years of experience and young companies, and the entrance to the project in both cases is from $ 10,000. Although increasingly well-known companies began to offer customers an alternative to the classic - PAMMs, entry into which starts at $ 1. This is because the manager accepts collective investments and works on the entire amount collected, after distributing the profit between the participants.

The second difference between the remote control and PAMMs is that in trust management, cooperation takes place between the investor and the asset manager. In PAMMs, there can be an unlimited number of investors.

Do not forget that since the remote control is an individual service, the conditions of cooperation can be negotiated so that the parties are as comfortable as possible to work together. In PAMMs, the manager sets his conditions, and investors only choose: is the game worth the candle or is it better to look for another option for transferring funds to management.

Advantages and disadvantages of trust management


Summing up the above, it is worth voicing the pros and cons of trust management.

Advantages of trust management:

Disadvantages of trust management:


In conclusion, I want to note that the classic form of trust management today is quite difficult to find among companies operating in the financial market. At least if we are talking about Forex. With banks it will be easier - there is only remote control and it is possible (without taking into account deposit offers). But PAMMs are offered by the vast majority of brokers and other financial companies, as as we noted earlier, this type of cooperation is less costly for investors, and the profit depends on the strategy of the managing trader and, in principle, a stable passive income can be counted on.

Author: Kate Solano, Forex-Ratings.com

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