Privately Managed Accounts

 “I sold my business five years ago and invested $3 million into the stock market.  I thought I knew what I was doing, it just didn’t look that complicated,” he said sadly.  “Right now, as of this morning, less than two years later, my stock portfolio is worth less than 50% of what it was when I bought it.  I’ve lost half of the profit from my life’s work and I’m just sick of the whole thing.”

Another dynamic that investors gain is customization. Let me explain it this way.  Many people live in communities that offer neighborhood swimming pool, where there are rules for hours of operation, seasonal opening and closing, appropriate attire, chemical standards for pool water, water temperature, etc.

As popular as neighborhood pools are, they are not found in most gated and wealthy communities.  Why is that?  Because, unlike the community pool, wealthy homeowners who want to pleasures of a pool also want to make all the rules.  They build their own pool and control it as they choose.

The differences between mutual funds and privately managed accounts are similar.  When an investor hands over his money to a mutual fund, he loses any control.  The manager makes all decisions for the benefit of the “community pool”:  when to buy, when to sell, whether to trigger a taxable event, etc.

By contrast, when an investor opens an account with a money manager, it is the investor who tells the manager what the rules will be, whether he needs tax efficiency, what risk he’s willing to take, how much liquidity he needs, etc.

Foundations, high-net worth individuals and families, and people with large sums to invest usually leapfrog the mutual fund option and instead hire a private account manager, or what we refer to as professional money manager.  In fact, many mutual fund managers are also private account managers. 

With few exceptions, it just makes no sense to invest in mutual funds when there is sufficient money to create a fully diversified private account portfolio.

Let me review some of the advantages of private accounts over mutual funds:

• A much higher degree of customization
• Lower fees
• Personalized communication
• Greater flexibility

So why doesn’t everybody skip the mutual fund level and go directly to professional money management!  The primary reason is that the minimum amount required to open a privately managed account can range from a low of $100,000, and may be as high as $1 million.  

Speak with a Recommended Financial Professional about privately managed accounts >