Managed Investment Accounts

Managed Investment Accounts – Personalized, Professional Portfolio Management

What Are Managed Investment Accounts?

Managed investment accounts are professionally managed portfolios in which an advisor oversees all investment decisions on behalf of the client. The client provides the advisor with key information—such as their time horizon, risk tolerance, goals, and any specific concerns about the money—while the advisor takes on the responsibility of deciding what to invest in and when to make adjustments.

Managed investment accounts offer a highly personalized approach, as your advisor customizes the investment strategy based on your unique financial situation. This level of professional management is beneficial for individuals who prefer to take a hands-off approach, entrusting their investment decisions to experienced advisors who actively monitor the market, assess risks, and make timely adjustments.

How Managed Investment Accounts Work

When you open a managed investment account, your advisor will conduct an initial assessment to understand your financial profile. This includes:

  1. Time Horizon: The advisor will evaluate how long you plan to invest before you need to access the funds. Longer time horizons allow for more aggressive investments, while shorter horizons call for a conservative approach to minimize volatility.
  2. Risk Tolerance: Risk tolerance measures your ability and willingness to endure market fluctuations. Advisors consider factors like your age, income, investment experience, and comfort level with potential losses to tailor an appropriate strategy.
  3. Financial Goals: Whether you’re saving for retirement, building wealth, or planning for a specific goal, such as a down payment on a home or a child’s education, your advisor will design the investment portfolio to align with your objectives.
  4. Concerns and Preferences: If you have concerns about certain types of investments (like those in high-risk sectors) or prefer socially responsible investing, your advisor will incorporate these preferences into your portfolio.

Once these factors are established, the advisor builds a diversified portfolio, selecting assets across various categories, such as stocks, bonds, mutual funds, ETFs, and alternative investments. The advisor continuously monitors the market and makes adjustments as needed to keep the portfolio in line with your goals and changing market conditions.

How Managed Investment Accounts Compare to Other Investment Options

  1. Professional Management: Unlike self-directed accounts, where you make all investment decisions, managed accounts entrust a financial advisor with investment selection, timing, and risk management. This allows you to benefit from professional expertise and reduces the burden of daily market monitoring.
  2. Customization and Personalization: Unlike mutual funds or ETFs, which follow a pre-determined strategy, managed accounts are tailored to your specific financial goals, risk tolerance, and preferences. This personalized approach can lead to better alignment with your long-term objectives.
  3. Proactive Management: With a managed account, your advisor actively monitors and adjusts the portfolio based on market trends, economic conditions, and any changes in your financial profile. This differs from passive investing, where investments are held without frequent adjustments.
  4. Cost Structure: Managed investment accounts generally have a fee based on a percentage of assets under management (AUM), typically ranging from 0.5% to 2%. This fee covers the advisor’s management services and may include other benefits like financial planning or performance reviews. While the fees are higher than DIY investing, the value of professional management can offset the cost for those seeking expert guidance.
  5. Tax Efficiency: Advisors often make investment decisions with tax efficiency in mind, using strategies like tax-loss harvesting or asset location to minimize tax liabilities. This proactive approach is especially beneficial for high-net-worth individuals and those with taxable accounts.

Types of Managed Investment Strategies

Advisors may employ a variety of strategies within managed accounts, based on the client’s risk profile and financial goals. Here are some common approaches:

  1. Growth Investing: This strategy focuses on capital appreciation, investing primarily in stocks with strong potential for growth. It’s suitable for investors with a higher risk tolerance and longer time horizon, as it may involve more volatility.
  2. Income Investing: Income-focused portfolios prioritize investments that provide steady income, such as dividend stocks, bonds, and real estate. This strategy is ideal for retirees or those seeking reliable cash flow.
  3. Balanced Strategy: A balanced portfolio combines growth and income assets, providing a mix of stocks, bonds, and other investments. This strategy aims to achieve a balance between risk and return and is suitable for moderate-risk investors.
  4. Tax-Efficient Investing: Tax-conscious investors may benefit from strategies focused on reducing tax liabilities. Advisors may use tax-efficient funds, tax-loss harvesting, or prioritize assets in accounts that minimize tax impact.
  5. Socially Responsible Investing (SRI): For clients who want their investments to reflect their values, advisors can create portfolios focused on environmental, social, and governance (ESG) factors. This approach aligns financial goals with personal ethics.

How Managed Investment Accounts Benefit You

  1. Expert Guidance and Market Knowledge: Managed accounts provide access to a professional advisor who has extensive market knowledge and can make informed decisions on your behalf. Advisors stay current with economic trends and investment opportunities, offering expertise that the average investor may not have.
  2. Tailored Investment Strategy: Managed accounts are customized to meet your specific needs. Your advisor takes into account your unique goals, timeline, and risk tolerance, ensuring your portfolio is aligned with your financial objectives.
  3. Proactive Adjustments: Advisors actively manage and adjust your portfolio based on market conditions and changes in your financial situation. This ongoing monitoring can help you avoid large losses, capitalize on market opportunities, and stay on track to meet your goals.
  4. Time-Saving and Stress Reduction: With a managed account, you can take a hands-off approach and let your advisor handle the day-to-day management of your investments. This saves you time and reduces the stress of constantly monitoring the market.
  5. Tax Optimization: Advisors are skilled at implementing tax-efficient strategies to help you maximize your returns and minimize taxes. By using techniques like tax-loss harvesting and strategically locating assets, they help enhance your after-tax returns.

Who Should Consider a Managed Investment Account?

  • Busy Professionals: If you have limited time to manage your own investments but still want to benefit from a personalized strategy, a managed account allows you to achieve your financial goals without the need for constant oversight.
  • Individuals Seeking Expert Guidance: Managed accounts are ideal for individuals who prefer the expertise of a financial advisor. By leveraging the advisor’s knowledge, you gain access to sophisticated strategies and personalized advice.
  • Long-Term Investors with Specific Goals: If you have clear financial goals, such as funding a child’s education, saving for retirement, or preserving wealth for the future, managed accounts provide a structured way to work toward those goals.
  • Investors with Complex Financial Needs: High-net-worth individuals and investors with complex financial situations (such as tax considerations, estate planning, or business ownership) benefit from the holistic approach of managed accounts, as advisors consider all aspects of their financial picture.
  • Those Seeking Tax-Efficient Strategies: For investors in higher tax brackets or those with taxable accounts, managed accounts offer tax-efficient strategies that can enhance after-tax returns, making them a valuable tool for wealth preservation.

How to Learn More

Managed investment accounts provide the expertise, customization, and proactive management that can make a difference in your financial journey. If you’re ready to work with a professional to achieve your financial goals and take the stress out of investing, contact our financial advisors today. We’ll help you determine if a managed account is right for you and create a strategy designed to meet your unique needs.

We want our clients to know we’re here to help them no matter what. If you want to know more about how we can help you, schedule an introductory call. 

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* Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Estate Planning services are provided working in conjunction with your Estate Planning Attorney, Tax Attorney and/or CPA. Consult them for specific advice on legal and tax matters.