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Separately managed accounts generally have a responsible entity in the background with custodial and administrative responsibility. Typically, you would apply for an account in a separately managed account, just as you would apply for units in a managed fund. However, there are some key differences and advantages:
- As a separately managed account holder, you actually own the underlying stock in your portfolio, i.e. you retain what is called beneficial ownership of it.
- You are generally able to view your securities through some sort of web-based application, simply by logging onto the Internet with a username and password.
- Your separately managed account portfolio can be invested across a number of models within the separately managed account or a single diversified model like the ASX Top 20 model.
- You can generally enter a separately managed account with cash or securities. If you already have a portfolio of shares in your name, you can minimise Capital Gains Tax (CGT) events by transferring your stock (in-specie) directly into your separately managed account without realising any capital gain on the stock.
Other features to look out for in a separately managed account
- Online reporting: reports can be accessed online and as required. This includes information on your account details, daily valuation, cash account transactions, investment purchases and sales, brokerage, dividend details and fees.
- Netting: eliminates unnecessary trading by offsetting buy and sell trades in a stock so that only the net position is traded. For example 2 model portfolios within the SMA each hold XYZ Company shares, if one model reducing its holding and the other increasing by the same amount this will not result in a transaction.
- Blending: holdings in a number of models can be merged so that they are displayed as a single portfolio for convenient viewing. Blending can also take full advantage of netting during trading time which may provide brokerage cost savings.
- Costs: fees can vary widely across separately managed accounts and should be checked closely. Generally a SMA fee structure includes one or more of the following types of fees:
- Administration
- Management
- Performance
- Adviser (unless you choose a direct option)
- Brokerage
However not all separately managed account fees are transparent and you should check closely for transfer fees, dishonour fees and release fees on account closure. |
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