What is a Managed Account?
Managed accounts offered by online brokers are a backdoor way for online brokers to capture management fees from erstwhile independent investors who were
initially attracted to the freedom and low commissions offered by online trading. However, they make sense for investors with large portfolios or those who
don't have the time, ability, or interest to make 100% of their investment decisions. For an annual fee, generally about 1-2% of assets, the broker will
set up, monitor, and manage a portfolio of stocks, bonds, ETFs, cash, and whatever else the investors decide will best meet their investing goals.
These accounts can feature groups of mutual funds or ETFs, a diversified portfolio of stocks, or any other combination of securities. Typically, investors
pay the advisor for finding the best portfolio fit and managing the account in either a passive or active manner. Managing may be as simple as "set it and
forget it," involve a periodic rebalancing, or involve more active trading. The management fee usually increases with the manager's degree of activity.
Below are summaries of the managed account products and fees from five of the leading online brokerages. All information is obtained from each broker's websites.
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Fidelity Managed Account Fees
Managed accounts with Fidelity also require a discussion with a Fidelity advisor who gathers information about an investor's goals and risk tolerance.
A proposal is then developed and submitted to the investor for review and approval. After approval, the assets are placed into the account selected by
the investor. Fidelity offers a wide selection of managed accounts, so they are presented in list form for ease of reading.
Diversified Portfolios include:
- Fidelity Portfolio Advisory Service requires a minimum investment of $50,000 and charges annual fees ranging from 0.63% to 1.7% of total assets invested.
- Fidelity Personalized Portfolios requires a minimum investment of $200,000 and charges annual fees ranging from 0.55% and 1.5% of total assets invested.
- BlackRock Diversified Income Portfolio requires a minimum investment of $200,000 and charges annual fees ranging from 0.55% and 1.10% of total assets invested.
Equity and Bond Portfolios include:
- Fidelity Equity-Income Strategy requires a minimum investment of $200,000 and charges annual fees ranging from 0.30% to 0.90% based on total invested assets.
- Fidelity Tax-managed U.S. Equity Index Strategy requires a minimum investment of $200,000 and charges annual fees ranging from 0.20% to 0.65% based on
total invested assets.
- Breckinridge Intermediate municipal Separately Managed Account (SMA) requires a minimum investment of $500,000 and charges annual fees ranging from 0.25% to 0.35% based on total invested assets
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Charles Schwab Managed Account Fees
Schwab offers two managed investment programs. Schwab Managed Portfolios require initial investments of $25,000. Investors may choose from 24 model portfolios of mutual funds or 12 model portfolios of ETFs. Annual management fees start at 0.90% for the first $100,000 in the account and incrementally decrease for assets above $100,000.
Schwab Managed Accounts are for investors with a minimum to invest of $100,000. Equity Managed Accounts offer more than 60 large-cap, small-cap, and international strategies. Annual fees range from 1.05% to 1.35%, depending on the account size. Charles Schwab Investment Management (CSIM) or leading third-party investment managers manage all accounts.
Fixed Income Managed Accounts typically require a $250,000 minimum investment. Options include PIMCO Municipal Bond Ladder strategies as well as short-term, intermediate, and long-term taxable bond strategies. Annual fees range from 0.25% to 0.65%, depending on the account size.
Diversified Managed Accounts offer a variety of asset allocation models based on Schwab research. Annual fees are between 0.85% and 1.10%, depending on account size. Four asset allocation models are offered: Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive. Asset categories used for the models include Large Cap Equity, Small Cap Equity, International Equity, Fixed Income, and Bonds.
Minimum investments are higher than the other Managed Accounts and range from $150,000-$250,000 for the Aggressive Portfolio, $350,000 for both the Moderately Conservative and Conservative Portfolios, and $650,000 for the Moderately Aggressive Portfolio.
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TD Ameritrade Managed Account Fees
Managed accounts offered by TD Ameritrade are basic and simple. Three
portfolios are offered:
- The Core portfolio is designed to build wealth.
- The Opportunistic portfolio pursues market opportunities.
The Supplemental Income portfolio is best suited for retirees and is geared toward income-producing investments.
Each portfolio consists of ETFs or mutual funds. Annual Management Fees vary depending on the portfolio but start between 1.0% and 1.35% of the first $250,000 on
the account. Additional balances are charged at lower rates.
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