Best Managed Account Brokerage Firms: Fidelity, Charles Schwab, Etrade, Scottrade, and TD Ameritrade Managed Investment Portfolios



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 options and fees from five of the leading online brokerages. All information is obtained from each broker's websites.



Scottrade rating

Scottrade

Scottrade Managed Account Fees


Managed accounts are available only through Scottrade Investment Management, an affiliate of Scottrade. Minimum investments in their product, the Client Program Account (CPA) are at least $25,000, depending on the account type. The standard fee schedule assesses the first $75,000 of an account at an annual rate of 0.90% and decreases incrementally for account balances over that minimum.

Scottrade Investment Management requires investors to call first to learn about the various programs, so no information about types of accounts or asset allocation models was readily available. Scottrade prefers to have investors consult with an advisor before deciding on any managed account options.


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Fidelity Investments rating

Fidelity

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 rating

Charles Schwab

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 rating

TD Ameritrade

TD Ameritrade Managed Account Fees


Managed accounts offered by TD Ameritrade are basic and simple. The minimum initial investment for these accounts is $25,000. 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.

The company also offers much better priced (0.30%) and much more popular robo advisor service called TD Ameritrade Essential Portfolios.


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Etrade rating

E*trade

Etrade Managed Account Fees


E*Trade offers two managed account programs: Managed Investment Portfolios (MIP) and Unified Managed Accounts (UMA). MIPs are portfolios of diversified mutual funds and/or ETFs that are actively managed and rebalanced by the E*Trade investment team based on your goals and tolerance for risk. UMAs are more comprehensive and provide active professional portfolio management as well as broad diversification across several asset classes, tax management features, and access to experienced money managers.

MIPs require a minimum investment of $25,000. Annual fees range from 0.90% on the first $100,000 of assets, down to 0.65% of assets above $1,000,000. Three income-producing models are offered (Conservative, Aggressive, and Inflation Protection). Four strategic growth models are offered (Conservative Growth, Moderate Growth, Growth, and Aggressive Growth).

UMAs are designed for larger, more complex portfolios, with a $150,000 minimum investment required. Portfolios may include individual stocks as well as mutual funds and ETFs and will seek broader diversification combined with an asset allocation that aligns with investors' goals and risk tolerance. A premium is placed on tax efficiency. The manager will do rebalancing when necessary in order to maintain the target asset allocation.

Annual fees start at 1.25% for the first $1,000,000 of assets and decrease incrementally to 0.95% for assets above $5,000,000.


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Best Managed Accounts Summary


Managed accounts from reputable online brokerages are a viable alternative to full-service brokers who offer managed accounts. Lower costs are the main reason to consider a managed account, but simplification and easier record keeping also play a role in attracting formerly independent investors. Although it seems counterintuitive to pay a small percent to a company to manage of collection of mutual funds or ETFs that already charge annual expense fees, managed accounts can provide better returns than individuals may achieve on their own because of inferior buying and selling decisions or inappropriate asset allocations.