how a managed account works
a managed account may contain financial assets cash or titles to property the money or investment manager has the authority to buy and sell assets without the client s prior approval as long as they act according to the client s objectives because a managed account involves fiduciary duty the manager must act in the best interest of the client or potentially face civil or criminal penalties the investment manager will typically supply the client with regular reports on the account s performance and holdings money managers often have minimum dollar amounts on the accounts they will manage meaning a client must have a certain amount of funds to invest many minimums start at 250 000 though some managers will accept 100 000 and even 50 000 accounts 12managers will usually charge an annual fee for their services calculated as a percentage of the assets under management aum compensation fees range greatly but most average around 1 to 2 of aum many managers will provide discounts based on an account s asset size so that the larger the portfolio the smaller the percentage fee according to the internal revenue service these fees are no longer tax deductible as investment expenses 3a new innovation to managed accounts aimed at lay investors is the so called robo advisor robo advisors are digital platforms that provide automated algorithmically driven portfolio management with little to no human supervision these platforms are typically cheaper charging for example somewhere in the region of 0 25 of aum and may require as little as 5 to get started 4managed accounts are typically used by high net worth individuals as they often require a high minimum dollar amount of investment managed accounts vs mutual fundsmanaged accounts and mutual funds both represent actively managed portfolios or pools of money that invest over a variety of assets or asset classes technically a mutual fund is a type of managed account the fund company will hire a money manager to look after investments in the fund s portfolio this manager may alter the fund s holdings per the fund s objectives 