Managed Money

Is a fee-based managed money account right for you?

You may have heard or read about fee-based managed money accounts and wondered what they are and whether they may be appropriate for you. Here are answers to some of the questions you may have about these professionally managed accounts:

Q. What is a fee-based managed money account?

A. A fee-based managed money account, also known as a professionally managed fee-based investment program, is an account managed by an independent professional money manager who, for one all-inclusive annual fee, creates a portfolio of stocks, bonds and cash, to meet your investment objectives.

Several consulting and investment services are provided for the all-inclusive annual fee. Rather than charge commissions on individual transactions, and charge separate fees for other services, a fee-based managed money account lets you know up-front what your all-inclusive fee will be. The fee is based on the value of the assets in your portfolio.

Q. What services are provided for the fee?

A. Fee-based managed money programs differ somewhat from firm to firm but typically, for one all-inclusive, annual fee, you receive:

Help in identifying investment goals.

Help in creating and reviewing a personalized investment policy statement that identifies your goals and objectives in writing.

Assistance in selecting a pre-screened professional money manager whose investment style and philosophy match your objectives.

Professional management of your account as a separate portfolio, to best address your specific goals.

Execution of transactions without a surcharge for commissions.

Review of your quarterly investment performance reports.

Ongoing consulting services provided by your financial advisor.

If these services were purchased individually, the cost would likely exceed the all-inclusive, annual fee. For an actively traded equity account, trading costs alone would generally add up to more than this fee.

Q. Can I hire a money manager on my own?

A. You can hire a money manager on your own, but there are more than 30,000 registered money managers to choose from in the United States today. Financial professionals at major brokerage firms have narrowed this large universe down to several hundred managers, then further screened a smaller group and made these managers available to you. A brokerage firm also monitors its pool of money managers on an ongoing basis and usually removes from the program managers who fail to meet the firm's pre-set criteria.

Q. How large does my account have to be?

A. Professional money managers typically handle very large institutional accounts. Often, these money managers require a minimum of $1 million or more, which places them out of the reach of many individual investors. Through the money management programs, you can benefit from the same knowledge and service as the largest pension funds for an initial minimum investment of about $100,000.

Q. What happens if my financial situation changes, or if I am no longer satisfied with my money manager?

A. Generally, if your financial situation changes or if the money manager you select is no longer satisfactory, simply contact your financial advisor who will reevaluate your situation and help you choose a money manager who is better suited to your needs, at no extra charge. You may also liquidate your account at any time, generally without charge.

Q. How can I find out more about professionally managed fee-based programs?

A. Your financial advisor can advise you as to whether placing your assets in a professionally managed, fee-based account is appropriate for your individual situation.

If you would like more information about establishing a professionally managed fee-based account, write care of Jim McHugh, Financial Advisor, Morgan Stanley, 555 Long Wharf Drive Maritime Center, New Haven 06511 or call (203) 781-5904.

This article is published for general informational purposes and is not an offer or solicitation to sell or buy securities or commodities. Any particular investment should be analyzed based on its terms and risks as they relate to your specific circumstances and objectives.

Jim McHugh is a financial advisor with Morgan Stanley and resident of Orange.