Podcast
Questions and Answers
What must be provided in writing for a discretionary account to be valid?
What must be provided in writing for a discretionary account to be valid?
- A list of authorized investments
- A detailed investment strategy
- A statement of account performance
- A discretionary account agreement signed by both parties (correct)
Which of the following accurately describes the nature of managed accounts?
Which of the following accurately describes the nature of managed accounts?
- All managed accounts are discretionary accounts by default.
- Fees on managed accounts are charged as part of a bundled service.
- Managed accounts fees are transparent and reported separately. (correct)
- Managed accounts fees are typically hidden in the investment returns.
What is the maximum duration for granting discretionary authority in a discretionary account?
What is the maximum duration for granting discretionary authority in a discretionary account?
- Six months
- Twelve months (correct)
- Indefinite until revoked
- Three months
Which type of accounts provides the most basic services in a managed account category?
Which type of accounts provides the most basic services in a managed account category?
What is a characteristic of exchange-traded fund wraps in the context of managed accounts?
What is a characteristic of exchange-traded fund wraps in the context of managed accounts?
What is a primary characteristic of the assets in a managed investment account?
What is a primary characteristic of the assets in a managed investment account?
Which of the following services is NOT typically included in a basic package for a managed account?
Which of the following services is NOT typically included in a basic package for a managed account?
What advantage do fees for managed accounts have over the management expense ratio of mutual funds?
What advantage do fees for managed accounts have over the management expense ratio of mutual funds?
What is the purpose of an investment policy statement in a managed account?
What is the purpose of an investment policy statement in a managed account?
How is transparency regarding investment management activities generally provided to clients?
How is transparency regarding investment management activities generally provided to clients?
What primary factor has contributed to the growth of fee-based accounts among high-net-worth clients?
What primary factor has contributed to the growth of fee-based accounts among high-net-worth clients?
Which benefit of fee-based accounts directly addresses concerns about advisor motivations?
Which benefit of fee-based accounts directly addresses concerns about advisor motivations?
How does tying advisor fees to assets under management impact the advisor-client relationship?
How does tying advisor fees to assets under management impact the advisor-client relationship?
What is one potential disadvantage of fee-based accounts mentioned in industry discussions?
What is one potential disadvantage of fee-based accounts mentioned in industry discussions?
Which statement accurately reflects a perspective on fee-based accounts?
Which statement accurately reflects a perspective on fee-based accounts?
What is the primary purpose of tax loss selling within a client's investment strategy?
What is the primary purpose of tax loss selling within a client's investment strategy?
Which of the following statements best describes model-based account management?
Which of the following statements best describes model-based account management?
What distinguishes separately managed accounts from mutual funds or pooled accounts?
What distinguishes separately managed accounts from mutual funds or pooled accounts?
In the context of separately managed accounts, who is primarily responsible for making investment decisions?
In the context of separately managed accounts, who is primarily responsible for making investment decisions?
What advantage do separately managed accounts offer in terms of client investment preferences?
What advantage do separately managed accounts offer in terms of client investment preferences?
Flashcards
Fee-based accounts
Fee-based accounts
Investment accounts where advisors charge fees based on services and/or assets under management, rather than commissions on trades.
Advantages of fee-based accounts
Advantages of fee-based accounts
More comprehensive financial advice, greater transparency (e.g. showing fees on statements), and reduced potential for conflicts of interest.
Disadvantages of fee-based accounts?
Disadvantages of fee-based accounts?
Some may not see advantages as great, as compared to commission-based accounts. It's a switch from a performance-driven, commission-based approach.
High-net-worth clients
High-net-worth clients
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Commission-based accounts
Commission-based accounts
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Managed Account
Managed Account
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Investment Policy Statement
Investment Policy Statement
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Transparency in Managed Accounts
Transparency in Managed Accounts
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Fee Structure (Managed Account)
Fee Structure (Managed Account)
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Client Ownership in Managed Account
Client Ownership in Managed Account
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What are managed accounts?
What are managed accounts?
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What is a discretionary account?
What is a discretionary account?
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What are ETF wraps?
What are ETF wraps?
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What are mutual fund wraps?
What are mutual fund wraps?
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What's the difference between discretionary and managed accounts?
What's the difference between discretionary and managed accounts?
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Tax Loss Selling
Tax Loss Selling
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Model-Based Account Management
Model-Based Account Management
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Non-Model-Based Account Management
Non-Model-Based Account Management
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Separately Managed Accounts (SMA)
Separately Managed Accounts (SMA)
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Advantages of SMAs
Advantages of SMAs
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Study Notes
Fee-Based Accounts Overview
- Fee-based accounts are a form of compensation for advisors rather than commissions
- Clients are usually high-net-worth
- These accounts group various services with a fee based on assets under management
- Fee-based accounts see increased use compared to commission-based accounts
- High-net-worth clients need more services than basic picking of stocks or bonds
Learning Objectives
- Understand the advantages and disadvantages of fee-based accounts
- Compare the characteristics and drawbacks of different managed fee-based accounts
- Describe the different types of unmanaged fee-based accounts
Key Terms
- Discretionary accounts
- Exchange-traded fund (ETF) wraps
- Fee-based accounts
- Household accounts
- Managed account
- Multi-manager accounts
- Mutual fund wraps
- Overlay manager
- Private family office
- Robo-advisor
- Separately managed accounts
- Unified managed account
Managed Fee-Based Accounts
- Portfolio managers make investment decisions for clients
- Clients directly own assets, not pooled like mutual funds
- A package of services for professional investment management often includes trading, rebalancing, asset custody and reporting
- Investment policy statements detail how assets are to be managed
- Fee structures can be negotiated on managed accounts, unlike the standardised fee structure of mutual funds
Non-Managed Fee-Based Accounts
- Either full-service brokerage accounts or self-directed brokerage accounts
- Full-service brokerage accounts include financial planning services alongside a fixed or unlimited number of trades, and a fee on assets managed.
- Self-directed brokerage accounts come in two types: Direct guidance, and robo-advisory. Direct guidance accounts offer trading tools and investment advice and use ETFs to build asset allocations. Robo-advisory services provide remote investment management mostly online.
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Description
This quiz provides a comprehensive overview of fee-based accounts, focusing on their characteristics, benefits, and drawbacks. Ideal for understanding the needs of high-net-worth clients, the quiz covers various types of managed and unmanaged fee-based accounts. Test your knowledge on comparing these accounts and their associated services.
