You may have heard of managed accounts or professional investment management or professional money management. But what do those terms actually mean? Simply put, it’s when a professional handles the investing for you. Here are some things to consider as you determine whether managed accounts may be right for you and your goals.
Financial planning vs. professional investment management
Before we get started, it’s important to establish the difference between financial planning and professional investment management. These two services are often confused and are not interchangeable. Every financial institution has a different way of handling both offerings. Some firms combine them; while other firms, like Fidelity, often separate the two.
Financial planning helps you create an overview of your current financial picture, establish goals, and develop a road map to help you reach those goals. Working with a financial professional for financial planning is generally free at Fidelity (however, exceptions may apply for financial planning through a professionally managed account), and everyone can benefit from working with a financial professional. A financial professional can also help you understand if a managed account may be right for your unique situation.
Professional investment management (or professional money management) is when an investment manager (or portfolio manager) handles investment decisions on your behalf once you open and fund a managed account. A managed account relationship can often include a 1-on-1 dedicated advisor, a team of advisors, a robo (digital) advisor, or a hybrid combination. There are generally fees associated with investment management. The fees will vary depending on the products and services you choose.
Who is professional investment management for?
There are a variety of professionally managed options, which are designed to accommodate various investor needs and preferences. Before considering a managed account or other professionally managed options, it may be helpful to ask yourself these 3 questions:
- Do I know how to invest? Gauge your level of comfort when it comes to investing. Do you have a general knowledge base needed to manage your own investments—or are you willing to learn?
- Do I want to manage my own investments? Are you interested in doing research, choosing investments, monitoring performance, and making any necessary adjustments along the way?
- Do I have time to do this? There never seems to be enough time in the day, so are you willing to add portfolio management to your to-do list?
There are no right or wrong answers or one-size-fits-all approach to investing and managed accounts are not for everyone, but being truthful with your answers to these questions can help you determine which investing path may be right for you. If you answered no to any of the above questions or already know you aren’t interested in managing your own investments, there are several options to get help.
What types of managed accounts are available?
No matter how you want to invest, we have a broad range of offerings suited to different investing needs. In terms of managed accounts, here are 2 main categories and what fees may be involved. Note, this is not a full list of professionally managed account options.
- Digital advice—Also known as a robo advisor, this option uses technology to help build a strategy around your goals and preferences when opening the account. Robo advisor accounts are managed online or through an app. Typically, robo advisors have a lower advisory fee than traditional managed account options, because they cost less to operate. Minimum investments can be kept low too, making robo advisors a good potential option for beginners. Some robo advisor accounts offer a hybrid approach with the ability to connect with a real person for personalized financial coaching. This means you’ll have access to a financial advisor to ask questions, exchange ideas, and discuss your goals in real time. Check out Fidelity Go® and get started investing for as little as $10. Fidelity Go® also offers hybrid services—access to a team of Fidelity advisors for unlimited 30-minute 1-on-1 phone calls—for an advisory fee of 0.35% a year for those with a balance of $25,000 or more.
- Access to advisors—Depending on your financial situation, you can either access a team of advisors, by phone or video, who will partner with you to help keep your investment strategy aligned with your goals through portfolio management, annual reviews, and tax-smart investing strategies,1 or you can work with a dedicated advisor and their supporting team for a customized experience. Fees and eligibility vary.
Not sure which service could work for you? Answer 4 questions to help you decide or consult with a financial professional.
Roles and responsibilities
Try thinking of investment management and financial planning like building a house. One person doesn’t do it all. Everyone has their specialties and works together as a team to finish the project. A financial plan is similar and has 3 main players.
- The investor—That’s you. You choose which account may be right for you based on your personal situation, open it, and then fund it.
- The financial professional—You can create a financial plan independently using tools, like the Fidelity planning experience, or work with a financial professional. A financial professional can help you outline your current financial picture, goals, risk tolerance, etc. Then they can work with you to develop a plan to help reach those goals and can make account recommendations based on your unique situation. Once your plan is in place, it's important to check in at least annually to ensure you're on track to meet your goals, or more frequently if you have any big life changes.
- The investment manager—If you choose to manage your own investments, you are the investment manager. If you choose to enlist professional help, the investment manager will develop a personalized investment strategy based on the information provided when opening the account. The investment manager will provide ongoing maintenance of your account by monitoring the markets and business cycles, make any trading decisions on your behalf, and, when possible, implement tax-smart strategies designed to help reduce the impact of taxes and enhance after-tax returns. In general, a person in this role stays behind the scenes and never actually engages with the investor.
“Think of the financial planner as having eyes on you, and the investment manager as having eyes on the money. Both can play a crucial role in the potential long-term success of your portfolio.” —Ryan Viktorin, CFP®, Vice President, Financial Consultant
How to evaluate your account’s performance
One of the benefits of having your money professionally managed is that someone is monitoring your accounts every day on your behalf. That being said, neither your investment strategy nor your financial plan should have a set-it-and-forget-it mentality. Both are evolving and can grow with you as your life changes. As a baseline, aim to review everything annually with a financial professional.
At Fidelity, account performance calculations are published monthly on the Performance tab in your Accounts view. This is where you can see how your account is trending compared to benchmarks or index blends, depending on your account type, in various time ranges. These numbers are important, but it’s also important to evaluate how the account is helping to support your goals. Here are a few questions you can ask during your next meeting with a financial professional:
- How am I performing relative to my benchmark and my goals?
- Am I prepared to handle potential unexpected events?
- Is my investment strategy in line with my long-term goals and the current market environment?
- Am I being tax-efficient and maximizing tax-smart strategies?
The bottom line
Managed accounts can provide a holistic end-to-end investment service. If you’ve established you don’t have the skill, will, or time to manage your own investments, a managed account can be an important tool to help you reach your short- and long-term goals. If you’re considering a managed account, consult with a financial professional.