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How to Choose a Financial Advisor
Hiring Professional Money Managers
By Tony DiSorbo
Owner, DAS Associates
Reaching financial goals and accumulating wealth is never an easy task. Developing a solid financial foundation requires sound financial planning and persistence. Furthermore, once you reach your financial goals, you may still face many challenges and obstacles such as preserving accumulated wealth. There are wide assortments of investments to choose from, including mutual funds, closed-end funds, exchange-traded funds, and variable annuities just to name a few. Having selection is typically good, however many successful people do not have time to devote to researching, selecting and monitoring investments for their portfolio.
One type of investment account that has been growing in popularity is professionally managed accounts (commonly referred to as separately managed accounts) geared to high net worth clients. Years ago, managed accounts were reserved exclusively for pension plans or institutions with millions of dollars to invest. When it comes to the management of your financial affairs, one style definitely does not fit all. For the discriminating investor who is seeking more customization to their investment portfolio, separately managed accounts may work well.
Managed accounts have professionals who select a portfolio of stocks and bonds according to an investment objective, and each manager, based on his or her specific area of expertise. The manager oversees multiple individual accounts invested to meet the same objective. Although managed accounts are sometimes confused with mutual funds, there are significant differences:
Separately Managed Accounts offer:
Direct ownership of individual securities such as stocks and bonds.
The investor may have the ability to eliminate certain types of securities (i.e. tobacco stocks.)
Some managers offer specific tax-management strategies, including tax-loss harvesting and offsetting of gains. Separate accounts offer individual tax lots, not subject to imbedded capital gains.
Individual securities that are currently owned by the investor may be able to transfer to the manager for monitoring.
It is true that separately managed accounts have definite appeal to a wide range of customers, however they’re not for everyone. The minimum account size is generally $100,000 per manager; therefore to get an appropriate asset allocation, investors need to have a significant amount of funds to invest. To determine if separate accounts make sense for you, contact a financial professional.
The author is a CLU and ChFC designee, a Registered Investment Advisor and registered representative of Jefferson Pilot Securities Corporation, member NASD, SIPC.
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