The A to Z of managed accounts

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A financial advisory and investment management firm has put together a dictionary of terminology to help investors understand the different types of investment services being offered today.

Crystal Wealth Partners recognised a need to clarify the world of managed accounts, and as a result they have released an “A to Z” on the subject. The list could provide advisers with a vehicle to better help their clients gain clarity and understanding.

In the document, Crystal Wealth explained that managed accounts are quite different to managed funds. With a managed fund, units in the fund are bought at a given price and investments go up or down depending on the value of the unit price.

While a manager may provide information about what they are investing in, an investor generally cannot see all of the portfolio assets at any time.

However, a managed account is quite different because the investor owns the underlying assets and there is full and ongoing investment transparency.

Managed accounts now include:

MDA - A managed discretionary account (MDA) is a personalised investment account where another party (the operator) manages a portfolio of assets individually for an investor. Portfolios are managed on a discretionary basis via specific individual mandate or through model portfolios and all assets are owned, either directly or beneficially, by or for the investor. This means all tax issues connected with the portfolio assets rest with the investor, not the operator.

SMA – Separately managed accounts (SMA) are similar to managed funds in that a responsible entity offers one or more professionally managed ‘model’ portfolios for investors.  However with SMAs the responsible entity (or investment manager) is acquiring the portfolio securities on behalf of the investor, not on behalf of the fund. This means investors hold beneficial ownership of the underlying investment assets and hence receive all tax issues connected with the portfolio.

IMA – An individually managed account (IMA) is simply a personalised account where generally all portfolio assets are owned directly by the investor. An IMA is usually operated on a discretionary basis and the term is often interchanged with ‘MDA’. IMAs are usually offered with a customised individual investment mandate and the investor receives all tax issues connected with the portfolio at all times.

UMA - A unified managed account (UMA) is the name given to a personalised investment account that encompasses every type of investment vehicle within the one co-ordinated account. A UMA can also include managing total portfolio assets across different tax entities on either a discretionary, model portfolio or non-discretionary basis while providing an overlay of reporting and tracking to the total household. UMAs usually provide consolidated reporting across all common forms of investment including direct property and managed funds.

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