Separately Managed Account (SMA)

In an SMA, a professional investment manager makes day-to-day decisions — which securities to buy, hold, or sell — but the resulting positions sit in an account titled in the client's own name. This is the defining distinction from a mutual fund or exchange-traded fund, where many investors share ownership of a single pool. Because the client holds the underlying securities directly, they have a degree of transparency and control that pooled vehicles do not offer.

That direct ownership creates practical advantages for substantial families. A family can instruct the manager to exclude certain securities — a tobacco company, a former employer's stock, or a position already held elsewhere — and can harvest tax losses on individual holdings without unwinding the entire strategy. Consider a hypothetical family that holds a large concentrated position in a single stock; an SMA running a broad equity strategy could exclude that stock to avoid compounding the concentration.

A common confusion is equating SMAs with separately managed accounts used in a broader wealth context. The account structure itself is neutral — the quality of outcomes depends heavily on manager skill, fee levels, and how well the mandate fits the family's overall asset allocation. Minimum investment thresholds vary widely by manager and strategy, and a qualified advisor should evaluate whether the structure suits a particular family's circumstances.