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Managed Account



A managed account is an investment account that is overseen by a professional money manager or investment advisor on behalf of an individual investor or institutional client. In a managed account arrangement, the investor delegates the responsibility of making investment decisions to the manager, who then makes trades and manages the portfolio according to the investor's objectives, risk tolerance, and other preferences.


Here are some key benefits investors receive from managed accounts:


Professional Management: Managed accounts offer investors access to professional money managers who have expertise in managing investment portfolios. These managers typically have a deep understanding of financial markets, investment strategies, and risk management techniques, which can help optimize the performance of the portfolio.


Diversification: A managed account allows investors to benefit from diversification across various asset classes, sectors, and geographic regions. Diversification helps spread risk and can potentially enhance returns while reducing overall portfolio volatility.


Customization: Managed accounts can be tailored to meet the specific investment goals, risk tolerance, and preferences of individual investors. The manager can adjust the portfolio allocation, investment strategies, and asset selection based on the investor's unique circumstances and objectives.


Typical advisory fees for managed accounts are often structured based on the Assets Under Management (AUM) model. Under this model, the advisor charges a percentage of the total assets they manage on behalf of the client. Common fees for professional investment management can vary depending on several factors, including the level of service provided, the complexity of the investment strategy, and the size of the portfolio. However, typical fee structures might include:


Asset-Based Fees: These fees are calculated as a percentage of the total assets under management and typically range from 0.5% to 2% per year. For example, if an investor has $1 million in assets under management and the advisor charges a 1% annual fee, the fee would amount to $10,000 per year.


Performance-Based Fees: In addition to asset-based fees, some advisors may also charge performance-based fees, which are calculated as a percentage of investment gains. These fees are typically assessed if the portfolio achieves returns above a certain benchmark or hurdle rate.


Flat Fees: Some advisors may charge a flat fee based on the services provided, regardless of the size of the portfolio. Flat fees may be more common for clients with smaller investment accounts or for specific services, such as financial planning or retirement planning.

It's essential for investors to carefully review and understand the fee structure and any associated costs before entering into a managed account arrangement. Transparency regarding fees and clear communication between the investor and advisor are crucial for building a successful and mutually beneficial relationship.



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