For investors who want or need a relatively customized and tax-efficient approach to creating a diversified investment portfolio, separately managed and unified managed accounts may help them achieve that goal.
A separately managed account (SMA) is a portfolio of assets that are managed by one or more professional money managers. SMAs are also called individually managed accounts, separate accounts or privately managed accounts. SMA assets are not co-mingled with those of other investors, as they are with a mutual fund. You are the sole owner of each security held within your SMA. You also can place securities you already own in your SMA. This can't be done with mutual funds.
An SMA gives you and your financial professional more control over the management of specific investments. This increases your ability to coordinate the sale of specific securities with the rest of your overall financial plan. Don't, however, expect to micro-manage every single trade, as you might with a traditional brokerage account. An SMA's overall investing strategy and securities selection often are based on a proprietary model developed by the investment management firm that operates it. Within that model and the guidelines you set, the money manager for your SMA typically will have discretion to implement strategies that the manager thinks will provide the best returns for you. After all, if you want to make all the decisions yourself, it probably doesn't make sense to hire a professional money manager.
An SMA often adheres to a single investing style. For example, you might have an SMA that focuses on large-cap U.S. stocks and a different SMA that invests in growth stocks. Some SMAs, however, may include multiple styles. An SMA must be managed by a professional investment management firm who may be independent or part of the same firm as your financial professional.
Unlike traditional brokerage accounts, which are commission-based, SMA fee structures are asset-based. They typically cover the investment management fee, trading costs, custody, reporting and financial planning services.
For more information about SMAs, contact one of our CFS Financial Advisors at Denali to learn how an SMA can fit into your investment strategy.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/ SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members.
For specific tax advice, please consult a tax professional.
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