Separate accounts, also known as managed or “wrap” accounts, are offered by many financial advisors. After going over your goals, risk tolerance, etc., the advisor will suggest a lineup of money managers. Each money manager will pick the securities you’ll own, in a given category.
Such an approach offers:
- Diversification. You’ll own many different stocks and bonds.
- Professional portfolio management. Your stocks and bonds will be chosen by experts.
- Access to top managers. By investing through these programs, your money will be managed by the same top performers who serve the very wealthy.
- Fee-based compensation. Rather than pay commissions on each trade, you’ll pay your advisor a fee that will grow if your account grows. So you and your advisor are on the same side.
- Tax advantages. Your money managers can time sales and purchases in order to minimize taxes on any investment gains.
