Unleash the benefits of SMAs for your clients

What are separately managed accounts (SMAs)?

A separately managed account (SMA) is a professionally managed portfolio composed of stocks and other securities that are directly owned by an investor. Direct security ownership can offer financial professionals increased flexibility to align holdings with client needs and preferences and to have more control over tax management. Increased visibility of transactions and holdings allows for a more individualized level of portfolio management, in which financial professionals can monitor the portfolio against client goals and objectives.

SMAs are a vehicle of choice for many investors, particularly those looking for more robust tax management, primarily because this investor segment tends to have more robust needs around tax management, customization, and transparency, and therefore may benefit most from the direct ownership of the underlying securities conferred by SMAs. Since the investor must own each underlying security in an investment portfolio, SMAs tend to have higher minimums to ensure that a given strategy can be implemented.

What is the difference between a managed account and a separately managed account? How do SMAs differ from other investment vehicles?

The term "managed account" refers to a portfolio of investments that is professionally managed on behalf of an investor. An SMA is a type of managed account that’s typically focused on a targeted investment strategy. 

Ownership structure is the primary differentiator between SMAs and other types of investment vehicles. While managed investments are pooled investment products—in which an investor owns a share in the fund, but the fund owns the underlying securities—the securities in an SMA are owned directly by the investor.*

What are the advantages of separately managed accounts (SMAs)?

How Investors Benefit:

• Tax Management: Direct ownership of the underlying securities enables robust and personalised tax management.
• Transparency: Investors have their own cost basis and can see their holdings and trading activity.
• In-Specie Funding: SMA investors may be able fund a new portfolio in kind with existing liquid securities (subject to the portfolio manager's and adminstrators' discretion).

How Financial Advisors Benefit:

• Client Needs: SMAs allow financial professionals to accommodate investors, who have more robust needs around tax management, customisation, and transparency—and therefore benefit from the direct ownership of the underlying securities conferred by SMAs.
• Expertise: Having a highly-experienced investment team manage the portfolio can lead to better investment outcomes for your clients and lower compliance risk for your business.