Displaying items by tag: customization

Separately managed accounts (SMAs) are gaining traction among financial advisors, with Cerulli Associates projecting assets in these programs to surpass $2 trillion in 2025. Assets grew 12% in 2023 and are expected to rise another 15% this year, boosted by the popularity of unified managed accounts (UMAs) that combine SMAs, mutual funds, and ETFs for tax efficiency and personalization. 

Advances in technology have made SMAs easier to manage, lowering minimums from millions to as little as $100,000 and expanding access beyond just high-net-worth clients. 

Advisors now use SMAs to tailor portfolios for tax management, ESG preferences, or concentrated stock positions, while UMAs provide a holistic view for strategies like tax-loss harvesting. The shift from commission-based brokerage accounts to fee-based managed accounts reflects investor demand for fiduciary oversight, transparency, and control. 

Finsum: With features like fractional share trading and portfolio-wide tax optimization, SMAs are increasingly seen as a flexible and efficient tool for personalized wealth management.

The rise of separately managed accounts (SMAs) is reshaping the financial services industry, shifting brokers from commission-driven sales to fee-based consulting focused on long-term client relationships. However, this transformation remains incomplete, as many advisors misuse SMAs, treating them like expensive mutual funds rather than customizing portfolios for individual needs. 

Despite SMAs' advantages, such as tax-loss harvesting and tailored asset allocation, few brokers fully leverage these features, with customization rates alarmingly low. A significant hurdle is inadequate diversification, especially as lower account minimums make it difficult to properly spread investments across multiple managers and styles. 

To address these challenges, brokers need better training, more robust technology platforms, and a commitment to understanding both their clients and their investment managers. 

Finsum: Ultimately, success with SMAs requires not just offering the product, but delivering ongoing service, customization, and disciplined portfolio management—a shift that, while slow, seems inevitable

A separately managed account (SMA) is a professionally managed investment portfolio tailored to an individual investor's needs rather than pooled with others. Unlike mutual funds or ETFs, SMAs provide direct ownership of securities, offering more control over investment decisions and tax strategies. 

Originally created for institutional investors, SMAs have grown in popularity, with assets under management reaching nearly $2.2 trillion by 2023. 

Their key advantages include flexibility in strategy, greater tax efficiency, real-time transparency, and typically lower fees compared to actively managed mutual funds. Investors can customize holdings and optimize tax implications through strategies like tax-loss harvesting. 

Finsum: While SMAs can be cost-effective, additional fees from financial advisors may apply, impacting overall expenses.

Model portfolios serve as pre-designed recipes for building portfolios, offering advisors a time-saving way to manage investments while focusing on financial planning and client relationships. They are often composed of mutual funds and ETFs, with a growing preference for active ETFs due to their cost-efficiency and flexibility. 

Popular providers include BlackRock, Vanguard, and American Funds, offering core allocations like 60/40, income-focused, and all-equity models. These portfolios appeal to advisors for their scalability and customization options, such as incorporating funds from multiple asset managers to diversify perspectives. 

While they are typically low-cost and tax-optimized, a drawback is their relative lack of transparency compared to mutual funds or ETFs. Investors should ask their advisors about the track record, due diligence, and success metrics of any model portfolio being recommended.

Finsum: We love the use of model portfolios to create customized and thematic strategies for tailored solutions to clients problems. 

Recent research from FTSE Russell reveals that direct indexing is on the verge of rapid growth among U.S. investment advisors. Currently, only 21% of advisors are using direct indexing, but nearly half plan to adopt it in the next 1 to 5 years. 

This method enables advisors to craft highly personalized portfolios for clients, addressing both tax efficiency and the need for customization. Direct indexing is particularly valuable in managing concentration risk, especially in large-cap equities, where certain companies dominate traditional indexes. 

With the rise of fractional share ownership, building tailored portfolios has become more accessible for investors with smaller amounts of capital. As the benefits of direct indexing—such as tax advantages and diversification—become more widely known, its adoption among advisors is expected to accelerate. 

Finsum: The expanding technology and investment solutions in this space position direct indexing to become a key tool for advisors seeking innovative ways to serve their clients.