By: Shaw Pritchett
At Jackson Thornton Wealth Management, we understand that as your wealth grows, so do your investment needs. While mutual funds and exchange-traded funds serve as excellent building blocks for many portfolios, separately managed accounts (SMAs) offer some investors a more personalized and tax-efficient approach to wealth management.
Direct Ownership: Your Portfolio, Your Securities
Unlike mutual funds where you own shares in a pooled investment vehicle, SMAs provide direct ownership of individual stocks and bonds. This means you hold the actual securities in your name, receive dividends directly and maintain voting rights in the companies you own. This direct ownership structure offers transparency that traditional funds simply cannot match—you’ll always know exactly what you own and why.
Tax Efficiency That Adds Real Value
One of the most compelling advantages of SMAs is their superior tax efficiency. Your portfolio manager can implement sophisticated tax-loss harvesting strategies throughout the year, strategically selling securities at a loss to offset realized gains. This active tax management can significantly reduce your annual tax burden, especially important for our clients in higher tax brackets. Conversely, with mutual funds, you might pay taxes on capital gains distributions even when you don’t transact.
Customization That Reflects Your Values And Goals
SMAs excel at accommodating your personal preferences and unique financial circumstances. If you hold substantial company stock from your employer, we can build your SMA to reduce concentration risk in that sector. If environmental, social and governance (ESG) factors are important to you, we can exclude certain industries or emphasize companies with strong ESG profiles.
This customization extends to risk management as well. We can adjust sector allocations, geographic exposure and volatility profiles to align with your specific risk tolerance and investment objectives.
Enhanced Transparency And Reporting
SMAs provide detailed performance reporting and transparency into portfolio decisions. You’ll understand not just how your investments are performing, but why specific securities were bought or sold, how tax-loss harvesting benefited your situation and how your portfolio aligns with your stated objectives.
The Investment Difference
While SMAs typically require higher minimum investments than mutual funds, they offer features that can meaningfully enhance after-tax returns for qualified investors. The combination of direct ownership, tax efficiency, customization capabilities and professional management creates a compelling value proposition for clients with substantial assets.
If you’re interested in exploring whether an SMA could enhance your investment strategy, we welcome the opportunity to discuss how this approach might align with your wealth management goals.
Your financial success deserves an investment strategy as individual as you are.
Shaw Pritchett is a Financial Advisor and President of Jackson Thornton Wealth Management in Montgomery. 334.240.3679 | [email protected].
