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Managed Account

Reviewed by Bhavana | Updated on Jan 29, 2021


Definition of a Managed Account

It is an investment account owned by a single investor—an institutional investor, an individual investor, or a retail investor. The account is supervised by the professional money manager hired by the investor.

Armed with discretionary authority over the account, this dedicated manager actively makes investment decisions relevant to the individual, taking into account the needs and objectives of the client, the risk tolerance and the size of the asset. Managed accounts have many advantages for a high net-value investor.

## How Does a Managed Account Function?

A managed account can contain financial assets, cash, or property titles. The money or investment manager shall have the authority to purchase and sell assets without the prior approval of the client, as long as they act in accordance with the objectives of the client.

Since a controlled account requires a fiduciary obligation, the manager must behave in the best interests of the company or possibly face civil or criminal penalties. Typically, the investment manager will provide the client with regular reports on the performance of the account and the holdings.

Pros and Cons of a Managed Account

*Pros: *

  • Customised managed accounts meet the needs of the account holder; mutual funds invest on the basis of the goals of the fund.

  • Managed account transactions may be timed to minimise tax liability; mutual fund investors have no control when the fund makes taxable capital gains.

  • Managed account holders have full transparency and leverage over assets; mutual fund holders do not own the assets of the fund, only a share of the asset value of the fund.

    *Cons: *

  • Managed accounts also require a total of six-figure contributions; mutual funds require much smaller initial investment amounts.

  • Investment or disbursement of controlled account assets can take days; mutual fund shares are more liquid and can be bought or sold on a regular basis.

  • Compensation for managed portfolio managers is an annual charge that can have an effect on the net return; the expense ratio of the mutual funds appears to be smaller.

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