23 - Fee-Based Accts

Question 0

What type of account has a licensed portfolio manager decide and execute investment decisions on behalf of their clients?

Answer 0

Managed accounts

Question 1

What are 4 reasons for the shift to fee-based accounts?

Answer 1

1. Commission-based = focus on trading
2. Fee linked to portfolio performance
3. Clear disclosure (fees are transparent)
4. More confidence in advisor

Question 2

What are 5 disadvantages of fee-based accounts?

Answer 2

1. Potentially more expensive
2. Limited # of trades (sometimes)
3. Neglect by the IA
4. Extra fees charged (eg MFs)
5. Trading & research time req’d

Question 3

What is the diff between managed and discretionary accounts?

Answer 3

Managed is ongoing while discretionary is for a shorter period of time (e.g. Illness or out of country)

Question 4

How must discretionary authority be given?

Answer 4

1. In writing by the client
2. and accepted in writing by a partner or director (must specify investment objective)
3. May not be solicited (managed accts can be)

Question 5

What are three types of managed account?

Answer 5

1. Single-manager
2. Multi-manager
3. Private Family Office

Question 6

What is a model portfolio and how is it used?

Answer 6

A mix of securities that a manager uses as a baseline for managed accounts. They then execute trades based on a client’s specific needs.

Question 7

What are three types of single-manager accounts?

Answer 7

1. Advisor or Investment Counsellor
2. Proprietary Managed Program
3. ETF Wraps

Question 8

What is a proprietary managed program?

Answer 8

A centralized investment management service that a firm provides to its advisors that has a list of model portfolios to choose from.

Question 9

What is an ETF wrap and what are the two types of approaches?

Answer 9

A basket of ETFs held in a managed account.

1. Passive
2. Active (tactically adjust sector weighting a to take advantage of the market)

Question 10

What are 5 roles of an overlay manager?

Answer 10

1. Conduct ongoing due diligence of sub-advisors
2. Sets overall asset mix
3. Ongoing monitoring of client’s investments
4. Coordinates sub-advisors
5. Provides market insight to sub-advisors

Question 11

What are mutual fund wraps?

Answer 11

A multi-manager account that holds a variety of mutual funds as directed by an overlay manager (and several sub-advisors).

Question 12

If a client has $150k to $500k what additional option do they have for their account type?

Answer 12

Separately managed accounts - where multiple sub-advisors each control their own sub account.

Question 13

How do multi-disciplinary accounts differ from separately managed accounts?

Answer 13

They take separate models and decisions by sub-advisors and combine them all into one single account.

Question 14

How does a unified managed account differ from a multi-disciplinary account?

Answer 14

Additional reporting on sub-advisor performance by organizing the account into “sleeves”.

Question 15

How much must be in an account in order to qualify for a “Private Family Office”?

Answer 15

$50 million or more