Definition

In banking, a managed account is a fee-based investment management product for high-net-worth individuals. The main appeal for wealthy individuals is the access to professional money managers, a high degree of customization and greater tax efficiencies in a fee-based product. They are not to be confused with managed bank accounts such as thinkmoney, e-money accounts and basic bank accounts, all of which are consumer banking products in the UK.

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What is a 'Managed Account'

A managed account is an investment account that is owned by an individual investor and overseen by a hired professional money manager. In contrast to mutual funds, which are professionally managed on behalf of many mutual-fund holders, managed accounts are personalized investment portfolios tailored to the specific needs of the account holder. With a mutual fund, the fund company hires a money manager who looks after investments in the fund's portfolio and may alter the fund's holdings in accordance with its objectives.

Explaining 'Managed Account'

A managed account may hold assets, cash or title to property for the benefit of the client. The manager may buy and sell assets without the client’s prior approval, as long as the manager acts 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.

Similarities and Differences Between Managed Accounts and Mutual Funds

Managed accounts and mutual funds help diversify an investor’s portfolio. Pools of money are invested over a variety of securities that are actively managed by professional managers.

Example of a Managed Account

In July 2016, the use of managed accounts was increasing as institutional investors withdrew from hedge funds due to disapproval of fees, returns and transparency. The investors wanted broader platforms, customized strategies, full control over their separate accounts, daily valuation, significantly lower fees and full transparency of portfolio holdings.

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Further Reading

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