The Cost of Separately Managed Accounts

Article of the week

Ashley Kilroy (SmartAsset): A Guide to Management Fees

Core Ideas

1) Based an AUM: Separately managed accounts (SMAs) typically charge management fees as a percentage of the assets under management (AUM). The percentage may either be fixed or tiered (declining for increasing levels of deposits and/or AUM, e.g. 1.75% up to $250,000, 1.5% up to $750,000, 1.25% up to $5,000,000, etc.).

2) Based on asset classes: Some SMAs charge different fee percentages for different asset classes (e.g. 1.5% on stocks, 0.75% on bonds, 0% on cash).

3) Wrap fees: Less commonly, SMAs consolidate fees for asset management, transactions, financial planning and advice into a single wrap fee (e.g. 1% - 3%).