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Models & SMAs
Models & SMAs
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Separately Managed Accounts to construct personalized portfolios
BlackRock Separately Managed Accounts (SMAs) provide enhanced capabilities to meet your clients’ financial goals.
How do separately managed accounts work?
In an SMA, the end investor has direct ownership of the assets, but an asset manager is responsible for making the actual trades and managing the portfolio. The asset manager typically charges a fee for their services, which is usually a percentage of the assets in the account.
SMAs vs ETFs vs Mutual Funds
Compared to pooled funds, SMAs provide visibility into the underlying securities, fee transparency, and the ability to personalize holdings to help manage tax consequences and align the portfolio with the client's values.
| SMAs | ETFs | Mutual Funds | |
|---|---|---|---|
| Diversified | |||
| Cost effectiveness | |||
| Seek to generate alpha | |||
| Transparency of holdings | |||
| Direct ownership of securities | |||
| Customize based on client preferences | |||
| Active tax-management |
How to start a separately managed account?
If you are interested in pursuing an SMA for your client, reach out to your BlackRock representative or contact us by calling 877-472-7625.
Why BlackRock for SMAs
As your SMA partner, we leverage our people and technology to help advisors solve their clients’ most complex investment challenges.
Benefits
01
Local partnerships
Access to personal portfolio managers (PMs)*, investment strategists and client service specialists.
02
Personalization beyond the ordinary
Enhanced customization capabilities seeking to deliver personalized solutions.
03
Proprietary technology
Institutional level risk management platform to help build resilient portfolios.
FAQ’s
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SMAs create benefits for both end investor and advisors by offering institutional investment management in an account of directly held securities. As a result, advisors of high net worth clients are increasingly adding SMA allocations in portfolios.
Benefits for the End Investor:
- Personalization: direct security ownership allows investors to tailor the holdings in their account to their investment objectives, personal values, and liquidity needs.
- Tax Efficiency: SMAs can be funded in kind with securities to reduce capital gains realization, customized with tax efficient features like state specificity in municipal bonds, and systematically tax loss harvested to offset gains elsewhere in client portfolios.
- Low Cost: SMA fees are often lower than those of mutual funds and can be negotiable for large client relationships.
Benefits for the Advisor:
- Capacity: advisors who adopt SMAs spend less time on research, portfolio management, and trading and more time with clients than peers who retain portfolio management responsibilities.
- Institutional Access: SMAs give advisors the opportunity to deliver institutional risk management, market access, and execution in each client account.
- Client Service: SMA PMs serve as an extension to an advisor’s team. BlackRock’s SMA PMs build client portfolios, conduct client reviews, and provide ongoing reports and analytics to both advisor and investor.
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SMAs fees are billed monthly or quarterly as a percentage of the portfolio’s NAV. This billing process makes SMA fees more transparent than fund fees which are typically deducted directly from fund NAV throughout the year. SMAs like ETFs are generally lower cost than mutual funds, which may appeal to high net worth investors who qualify for their minimums.
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SMAs are available through SMA or Unified Managed Account (UMA) platforms from broker dealers, custodians, and TAMPs across the wealth management industry. While each platform is unique, every SMA falls into one of two categories:
Dual Contract: the SMA manager signs a direct contract with both advisor and client. This structure enables high levels of account customization and pricing flexibility, but may be more operationally cumbersome.
Single Contract: the SMA manager signs a contract with the advisor, but not the client. While simpler to onboard, single contract SMAs offer less customization and pricing flexibility. SMAs on UMA platforms are single contract.BlackRock has SMA placement on all major industry platforms. For platform specific availability, please reach out to your BlackRock representative.
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* For clients with accounts greater than $1 million.
Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. Actual investment outcomes may vary. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. No representation is being made that any account, product or strategy will or is likely to achieve profits.
This material is not intended to be relied upon as investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. You should consult your tax or legal advisor regarding such matters.
This material is intended for use by a third-party financial professional in consultation with their client. BlackRock Investment Management, LLC (“BlackRock”) acts as either a discretionary investment manager or a non-discretionary model provider to sponsor firms in a variety of separately managed account or wrap fee programs. BlackRock is not acting in a fiduciary capacity with regard to any client of a financial professional. Results of any account or portfolio derived from this information may vary materially from the results shown herein. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular level of results. Any tax information provided herein is for illustrative purposes only and does not constitute the provision of tax advice by BlackRock. Please consult with a tax professional for more information with regard to an investor’s specific situation.
Due to the complexity of tax law, not every single taxpayer will face the situations described herein exactly as calculated or stated, i.e., the examples and calculations are intended to be representative of some, but not all, taxpayers. Since each investor’s situation may be different in terms of income tax, estate tax, and asset allocation, there may be situations in which the recommendations would not apply. Please discuss any individual situation with tax and investment advisors first before proceeding. Taxpayers paying lower tax rates than those assumed or without taxable income would earn smaller tax benefits from tax-advantaged indexing or even none at all compared to those described.
© 2023 BlackRock, Inc., or it's affiliates. All Rights Reserved. BLACKROCK, iSHARES and ALADDIN are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.
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