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A Guide to the Separately Managed Account

  • Parkview Partners Capital Management
  • 3 days ago
  • 3 min read

Understanding What a Separately Managed Account Is


A separately managed account (SMA) is an investment portfolio of individual securities owned directly by an investor and managed by a professional investment firm. Unlike pooled investment vehicles such as mutual funds or exchange-traded funds (ETFs), an SMA provides direct ownership of each security within the portfolio.


This structure allows portfolios to be managed in alignment with an investor’s specific financial circumstances, objectives, and preferences, while still benefiting from professional oversight.


Three tailored suits hang on a rack, with tablets showing financial graphs and 'CUSTOM OWNERSHIP' on a wooden table.


How Separately Managed Accounts Work


An SMA is typically established after an investor and advisor define investment goals, risk tolerance, time horizon, and any personal constraints. A professional portfolio manager then implements and manages the strategy within those parameters.


SMAs are often structured as discretionary accounts, meaning the manager is authorized to make investment decisions on behalf of the investor, provided those decisions remain consistent with the agreed-upon strategy. This allows the manager to respond efficiently to market conditions without requiring approval for each transaction.


Key Features of Separately Managed Accounts


Direct Ownership


Investors hold title to each stock, bond, or other security in the portfolio. This ownership structure provides clear visibility into holdings and transactions at all times.


Professional Portfolio Management


A designated investment manager is responsible for security selection, portfolio construction, and ongoing monitoring. Decisions are guided by the investment mandate established at the outset.


Portfolio Customization


SMAs may be tailored to accommodate:


  • Values-based investment preferences

  • Restrictions on certain industries or securities

  • Existing concentrated positions

  • Specific tax considerations


Customization distinguishes SMAs from standardized investment products.


Tax-Aware Portfolio Management


Because the investor owns individual securities, SMAs may allow for more targeted tax management strategies.


Examples include:


  • Selecting when to realize gains or losses

  • Implementing tax-loss harvesting at the individual security level

  • Managing holding periods intentionally


These tools are often not available within pooled investment vehicles, where tax events are driven by fund-level activity.


Diagram illustrating the advantages of separately managed accounts: customization, tax efficiency, and transparency.


Transparency and Reporting


SMAs provide full transparency into portfolio holdings and activity. Investors can review positions, transactions, and performance at the security level rather than receiving summary information.


This clarity may help investors better understand how their portfolio is managed and how decisions align with long-term strategy.


Comparing SMAs to Mutual Funds and ETFs


Ownership Structure


  • SMAs: Direct ownership of securities

  • Mutual Funds / ETFs: Ownership of fund shares


Customization


  • SMAs: High degree of customization

  • Mutual Funds / ETFs: One-size-fits-all approach


Tax Management


  • SMAs: Security-level tax planning possible

  • Mutual Funds: Capital gains distributed at the fund level

  • ETFs: Generally more tax-efficient than mutual funds, but still pooled


Each structure serves different purposes depending on investor needs and circumstances.


Investment Minimums and Fees


Separately managed accounts typically require higher minimum investments than pooled vehicles. Minimums often begin at six figures, though they may vary by strategy and manager.


Fees are commonly structured as an asset-based “wrap fee” that may include portfolio management, trading costs, and administrative services. Fee structures and services should be reviewed carefully before implementation.


When an SMA May Be Considered


SMAs are often evaluated by investors with:


  • Larger or more complex portfolios

  • Significant taxable assets

  • Concentrated equity positions

  • Values-based investment preferences


They are generally used as part of a broader wealth management strategy rather than as a standalone solution.


Flat lay of a desk with an open notebook displaying 'GET STARTED' and two checked boxes.


Integrating SMAs Into a Broader Financial Plan


The effectiveness of a separately managed account often depends on how well it is coordinated with other planning areas, such as retirement income planning, estate planning, and charitable strategies.


Regular reviews help ensure that the SMA remains aligned with changing goals, tax laws, and market conditions.


Conclusion


A separately managed account is a personalized investment structure that emphasizes direct ownership, customization, and transparency. When used appropriately, SMAs can support long-term portfolio management within a comprehensive financial planning framework.


As with any investment strategy, suitability depends on individual circumstances and should be evaluated with qualified professionals.



Investment advice offered through Stratos Wealth Partners, Ltd., a registered investment advisor. Stratos Wealth Partners, Ltd and Parkview Partners Capital Management are separate entities. Neither Stratos nor Parkview Partners Capital Management provides legal or tax advice. Please consult legal or tax professionals for specific information regarding your individual situation. Investing involves risk, including possible loss of principal. The information presented is for educational purposes only and should not be interpreted as individualized investment, tax, or legal advice. Past performance is not indicative of future results. For more information, please review our Form ADV, available upon request.


 
 
 

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Financial Advisor, Investment Advisor, High Net Worth, Wealth Management, Tax Planning, Risk Management, Financial Coordination, Retirement Planning, Charitable Giving, Columbus Ohio, Parkview Partners Capital Management

291 East Livingston Ave.
Columbus, OH 43215


Phone: (614) 427-2132

Fax: (614) 427-2132

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