Brokers and financial planners increasingly are offering managed account program, sometimes known as “separate accounts” or “consultant wraps.” In the past, only investors with millions of dollars could afford to hire first-rate money managers.
Now, consultant wrap programs may be available to investors with portfolios as small as $250,000. Minimums are going down so that investors with even smaller amounts may have access to high-quality money managers. These arrangements usually begin with a face-to-face interview between you and a financial advisor, who’ll help you develop an asset allocation. Your consultant might advise you to hold $100,000 in large-company growth stocks, $100,000 in large-company value stocks, $100,000 in small-company stocks, etc.
Once your asset allocation is set, your advisor will help you to pick out independent money managers who specialize in each category. In small-company stocks, for instance, the advisor’s firm might have a list of four or five top managers from which you can select.
The managers in these programs ordinarily won’t handle accounts smaller than $500,000, $1 million, or more. When participating in managed account programs, though, these outstanding money managers might require minimum accounts of only $100,000, or even $50,000. Thus, average investors now have access to investment management skills formerly restricted to the super-rich.
