Separately Managed Account

Term of the week

What: A separately managed account (SMA, aka broker managed account, managed account) is an investment account where the account holder authorizes a professional manager (investment advisor, broker) to execute an agreed-upon investment plan.

Why: Contrary to mutual and exchange-traded funds, SMAs allow the customization of a professionally managed investment portfolio to the account holders’ personal needs and circumstances.

How: The assets in SMAs are held in the name of the account holders. The managers do not need to seek account holder approval for individual transactions.

Conclusion: SMAs represent a flexible and transparent (but costly) investment vehicle for hands-off investors with substantial investible assets.