Separately Managed Accounts
At JPB Financial, we offer a range of financial investment options and can consult with you based on your unique financial and personal needs and preferences. One such option is the Separately Managed Account (SMA). An SMA is an investment account that you directly own but is managed by someone else. In your case, our firm will delegate your account to our proprietary broker-dealer, Avantax, a nationally recognized firm made up of experienced investment professionals who continuously monitor market conditions and make informed decisions to optimize your portfolio's performance.
Here are some key aspects of SMAs:
SMAs include highly customizable accounts. SMAs give you direct control over how your shares are invested. By comparison, investing in a mutual fund gives you part-ownership of all the underlying assets. However, you won’t be able to choose the companies that make up your shares. SMAs, in contrast, allow you to proportion your shares among companies that you are willing to invest in through an intermediary, typically a financial manager. You can choose your preferred companies or industries to invest in if you have specific needs and objectives (e.g. religion, ethics, ESG, etc.).
SMAs come with tax benefits.Tax gain/loss harvesting, available through SMAs, can help you minimize anything you owe in capital gains taxes. For instance, two securities that you sell have diverging scenarios: one with gains and the other at a loss. The offset the difference creates reduces any potential liabilities owed for capital gains taxes. Anything that you gain from the sale at the end can be reinvested.
You’ll be able to avoid tax liabilities associated with embedded capital gains. Unlike mutual funds, where you’ll have to pay your share of taxes based on gains from the fund, your SMAs are taxed based on individual securities within the portfolio.
However, SMAs come with several stringent requirements, as will be stated below:
SMAs are geared towards individuals with substantial net worth. While you’ll be owning the stock, you’ll still need to communicate with managers who watch and delegate your shares accordingly. There are several minimums associated with entering an SMA, each based on the type of account you’ve chosen. With Avantax, the account minimum is $15,000.
You will have to be a more active investor. Unlike other brokerage options, you’ll be expected to take proactive governance over your portfolio. Through our firm, you’ll be able to access regular account statements, performance reports, and general updates, which will keep you informed of your portfolio and enable you to figure out what you’ll need to adjust in your SMA.
If SMAs interest you, we can help you begin your journey and guide you to the best financial options for your investment needs – SMAs among them. Call us or email us to set up a free session.
Additional Resources:
What Is a Separately Managed Account (SMA)? | SoFi
Finding Alternatives in Separately Managed Accounts (investopedia.com)