What to know amid the rise of separately managed accounts
SMAs can provide tax advantages, but investment minimums may be steep


Separately managed accounts (SMAs), or custom investment portfolios overseen by professional money managers, were once reserved for the high-net-worth. But recently, according to The Wall Street Journal, "SMAs are growing in popularity as investment minimums fall — and amid a heavy marketing push."
Per the Journal, this marks a notable shift, with individual investors "bucking the trend toward passive investing in mutual funds and exchange-traded funds in favor of active, individualized money management." While there are certainly upsides to these personalized portfolios, there are also drawbacks worth noting.
What is a separately managed account?
As Investopedia explains it, "an SMA is a portfolio of assets managed by a professional investment firm." Unlike pooled investment vehicles like mutual funds and ETFs, which are comprised of "investments shared by a group of investors," separately managed accounts are personalized to the individual investor, who directly owns all of the securities in the account.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
"Within the portfolio there may be stocks, bonds, cash or cash equivalents, or other assets," reports SoFi, as it is "up to the investor to choose which strategy to follow, based on their individual needs, risk tolerance, and objectives."
What are the benefits of separately managed accounts?
According to SmartAsset, the fact that you own all of the securities in an SMA "gives you a bit more flexibility as to how those funds are invested and managed, as well as the transparency to monitor trades in real-time."
Further, you'll have a portfolio that's completely customized to you, as opposed to other pooled investment vehicles, which "are tailored to what best benefits investors as a group," explains SmartAsset. This means that you may have the ability to "exclude certain securities or request that others be added to align with your investment goals," or even "change the direction of the strategy in the case of a recession or other market event," SoFi notes.
Additionally, SMAs can provide tax advantages. According to SoFi, "with separately managed accounts, a financial advisor or wealth manager can implement tax-loss harvesting strategies to help you get the most from your investment dollars."
Are there any downsides to separately managed accounts?
Arguably one of the biggest downsides of SMAs is the cost involved. According to the Journal, citing data from Cerulli Associates, while "average fees for SMAs depend on many factors such as the size of your investment and the asset manager you select," they tend to average a total of "around 1.44% overall, and they include the financial adviser fee of 1.14% and an asset management fee of 0.3%." This is far steeper than the costs of mutual funds and ETFs — "average fees for mutual funds are 1.01% and 0.48% for ETFs," the Journal reports, citing Morningstar Direct.
And while investment minimums for separately managed accounts are getting lower, they can still be steep. Per SmartAsset, "many financial institutions require a hefty minimum to open a SMA, often between $50,000 and $100,000." Sometimes, per the Journal, you may find minimums as low as $25,000.
There's also the possibility that an SMA may offer less diversification than pooled investment vehicles, which is important for lowering your risk by spreading your money across a range of assets. "Since separately managed accounts hold individual securities," writes SoFi, "it's harder for them to offer the same level of broad-based diversification as a mutual fund or exchange-traded fund (ETF), which could hold hundreds or thousands of different stocks."
How can you invest in an SMA?
Before you invest, consider if an SMA is really right for you. "If you are in a high tax bracket and have a lot of sources of capital gains, an SMA may be appropriate," D.J. Tierney, director and senior portfolio strategist at Charles Schwab Asset Management, told the Journal. Meanwhile, for those who are "young and don't have individual capital-gains exposure this may not be for you," per Tierney.
To open an SMA, you'll need to turn to a professional investment management firm. As SoFi explains, "investors pay a financial professional to manage the separately managed accounts they own," and while "the portfolio manager handles day-to-day decision making [...] the investor retains control over the overall SMA investment strategy."
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.
-
5 hilariously sparse cartoons about further DOGE cuts
Cartoons Artists take on free audits, report cards, and more
By The Week US Published
-
Following the Tea Horse Road in China
The Week Recommends This network of roads and trails served as vital trading routes
By The Week UK Published
-
Crossword: March 30, 2025
The Week's daily crossword
By The Week Staff Published
-
How to pay off student loans
The explainer Don't just settle for the default repayment plan
By Becca Stanek, The Week US Published
-
Do student loans affect a credit score?
the explainer Repaying loans on time will strengthen your credit — but paying late will hurt it
By Becca Stanek, The Week US Published
-
Should I consolidate my student loans?
the explainer Consolidate your loans and you will have just one monthly payment to keep track of — but your interest rate may increase
By Becca Stanek, The Week US Published
-
What's a student loan and how does it work?
The Explainer These loans can cover the cost of tuition, housing and textbooks — but they must eventually be repaid, plus interest
By Becca Stanek, The Week US Published
-
How to get student loan forgiveness
the explainer Four options for paying back (less of!) your federal student loans
By Becca Stanek, The Week US Published
-
ABLE accounts: how they work and who can benefit from them
the explainer These state-administered accounts are available to people with disabilities
By Becca Stanek, The Week US Published
-
5 reasons to file your taxes sooner than later
the explainer Many experts recommend filing well ahead of the annual April deadline
By Becca Stanek, The Week US Published
-
With economic uncertainty, 2025 looks to be a 'No Buy' year
In the spotlight Consumers are cutting back on splurges to combat overconsumption
By Theara Coleman, The Week US Published