Separately Managed Accounts?

[OddGuy]

Well, I must be doing something right...just got my first ever "check in" call from a local Fidelity advisor. He introduced himself, asked if I was concerned about current market volatility.

"Nope, I have a long term perspective, but thank you for asking."

He went on to briefly tell me that my current net worth (within Fidelity) would make me eligible for some financial instruments that could have a lower cost structure than my self-managed brokerage/IRA accounts.

I thanked him and asked for info by email...he sent links to an overview of Fidelity's "Separately Managed Accounts."

I'm all ears as to what the FIRE community may have to say about all this!

 

[OldShooter]

...he sent links to an overview of Fidelity's "Separately Managed Accounts."...

IMO these are an ego thing to make a retail investor feel like a big deal. It would be totally impossible for Fido to actually manage a huge number of tiny accounts individually. What they will do (same for any broker offering this to us tiny retail account folks) is to select from a few "sleeves" that suit the client, maybe offering a tweek or two. Then, if the sleeve is in individual stocks, it will either be seriously undiversified or it will approach "closet indexing." https://www.investopedia.com/terms/c/closetindexing.asp If it is in mutual funds there will be a large number to make things look difficult but the net performance is likely to be closet indexing.

I reviewed one separately managed account for a small nonprofit, IIRC about $15M. I gave up counting after I passed 200 individual stocks. A poster child for closet indexing.

 

[gcgang]

Could you explain how the SMA has a lower cost structure than what you’re currently doing?

In my experience, SMAs are pretty high cost and they tend to be pretty tax inefficient.

 

[MRG]

I received a pitch about this a while back and decided it was a great deal for Fidelity

 

[OddGuy]

Yeah, this is all what I figured.

Especially since he sounded young and green and was effusively thankful I took the time (2, 3 minutes?) to listen to his eloquent pitch.

Got the feeling he was in a "boiler room" environment.

When he did a mild dig that I could do better than the Contrafund I'm currently in, my skeptical radar went up.

 

[RobbieB]

Yeah, if they are calling you they are selling.

 

[luckydude]

DM signed up for a managed account at Fido a few years ago. DD had passed and a FIDO FA at a local branch was really helpful (he was) in sorting out various accounts that DD had and getting account ownership updated based on terms of DD's will. So, when the FA suggested a management account, DM decided to sign up and put a few hundred thou in there. She knew that it wasn't the best place to put her money but told me that she wanted to reward the FA for his help.

Subsequently DM brought me to meet the FA. Nice guy (aren't they all). He showed me the various high expense ratio funds that he had invested for DM and told me how great the funds were performing. I smiled, nodded and thank him for managing DM's $ so well. It was DM's wish and there was no point rocking the boat.

The bright side is that the managed account makes up only a tiny % of DM's assets and she lets me manage the rest---all in VG index funds (of course) and real estate. In the meantime, DM gets the VIP treatment every time she goes in there, and she really enjoys that.

So FA is happy that he got to make some $, DM is happy that she did right by someone who helped her and gets the VIP treatment to boot, and I am happy that the damage is minor. Win-win-win all around.

 

[DrRoy]

I also got a call this year from a new Fido guy at a new office near my home. He just asked what he could do for me, didn't push SMA or anything else. Past Fido guys have pushed this or that.

 

[SecondCor521]

He went on to briefly tell me that my current net worth (within Fidelity) would make me eligible for some financial instruments that could have a lower cost structure than my self-managed brokerage/IRA accounts.

This makes me think about the part of the book where being Tom Sawyer's friend made them eligible to whitewash the fence.

https://www.pbs.org/kenburns/mark-twain/tom-sawyer/