Advantages of Managed Accounts

The primary advantages of managed accounts are transparency, control and access to top money managers. The mechanics of a managed account are different, so you are able to create a highly customized product that is tailored to not only your investment beliefs, but your tax needs as well. As technology has advanced, money managers are more able to efficiently manage several individual accounts. This efficiency means that they can make this approach both profitable and direct, which results in more options for most investors.

The Mechanics of a Managed Account

A managed account is an actively-managed portfolio of investment vehicles that a professional manager selects specifically for you. They will often place the same trades in multiple managed accounts, but you are able to customize your account by placing special restrictions on the account if needed. If, for example, you would prefer to not support companies that engage in either the production of alcohol or gambling (the so-called “sin stocks”), you can add the mandate that sin stocks are prohibited in your account. The manager will then trade his strategy according to his universal research, but when he wants to buy these stocks, they will not be included in your account.

In addition to the ability to place specific conditions on the account, because you are the account owner, you can see what is in it at any time. This dynamic may differ between managers, but generally, you have instant access to information. You are able to see how your funds are allocated at any given time and request changes as needed. Many managers do not like this feature because it allows you to mimic their trading strategies with funds for which they receive no fees. However, in the aftermath of the recent financial meltdown, this is becoming more and more common. The managed account structures parts from the typical investment fund model in which capital is pooled and you receive quarterly or monthly statements as to how your money is deployed.

Tax Impact

While not the primary intention of a managed account, you can tailor this type of account to your tax needs as well. Stocks held for over a year are subject to capital gains tax and are not taxed as ordinary income. If you need your funds managed to a specific tax treatment, this mandate can also be added to a managed account. You should be careful not to undo the skill of the manager you have hired by putting too restrictive conditions on him.


In addition to the ability to customize your account, attain full transparency and influence tax treatment, managed account tend to afford you more access to your money manager. The increased amount of information that you receive makes it easier to ask questions and managers have tried to be more available. It is important to realize, however, that if your money manager is on the phone answering your questions, he or she is not managing your account, doing research, or making trading decisions. This advantage should not be abused if you wish to achieve the best results.

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