Separately Managed Accounts (SMAs) are not new. In fact, they have long been used by corporations, trusts, endowments, pension plans, and high net worth investors. These investors demand a level of attention to their requirements that simply cannot be met by mass-market retail investment products. These investors require a focus and direct relationship with the professionals who are managing their investment portfolios.
10 Advantages Separately Managed Accounts have over Retail Products
(Mutual Funds, Pooled Funds, Segregated Funds, Wrap Accounts, ETFs, etc.)
SMAs invest only in assets that are consistent with the Investment Policy Statement that is unique to each investor, reflecting their specific financial position, short and long-term investment needs, risk tolerance, and other special circumstances.
Financial Advisor Focus
Financial Advisors focus on clients and their specific issues and needs as they are not distracted by markets, research and asset management.
The Interests of the Client, Portfolio Manager, and Financial Advisor are aligned
The decisions made in every portfolio will directly affect the compensation earned by the Portfolio Manager and Financial Advisor. This means the interests of all parties are all aligned. When a client succeeds, the Portfolio Manager and Financial Advisor share in that success.
Lower Fees with Full Disclosure
SMAs have a fully disclosed fair and negotiated fee structure. Management Fees are generally tax-deductible in non-registered accounts.
SMAs allow for direct ownership of assets (not units of a fund). All holdings are disclosed. Investors receive immediate transaction confirmations, monthly & quarterly statements and performance reporting from the Portfolio Manager on a regular basis.
SMAs provide the ability to control the timing of transactions that have tax implications. They provide a cost base that is unique to each investor, with realized capital gains or losses reflecting the actual gains and losses for the investor.
SMAs typically remain fully invested, providing the opportunity to earn investment returns on equity and fixed income positions as opposed to holding cash balances. Lower fees and lower trading costs can also have a big effect on returns.
SMAs reflect the investment style of the Portfolio Manager and the constraints of the Investment Policy Statement. This allows the Portfolio Manager to focus research on a manageable number of companies within their area of expertise, allowing for a better understanding of both the companies and the industries in which they operate.
SMAs allow the investor to receive a superior level of service from their Financial Advisor and Portfolio Manager. Investors receive a customized investment solution, reflecting the parameters of the Investment Policy Statement and the direct relationship with the Financial Advisor and Portfolio Manager.
As assets in SMAs are held in IIROC accounts at the custodian, they benefit from one million dollars of insurance from CIPF (Canadian Investor Protection Fund).