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What is a Separate Account? Separate Accounts comprise individual stocks, ETFs, options and other securities, owned directly by an investor. These portfolios are professionally managed and designed to achieve higher performance with lower fees, increased tax efficiency, heightened asset control and greater transparency. Originally reserved for wealthy families and institutions, Separate Accounts have now expanded so that those with emerging wealth have the opportunity to enjoy this logical evolution from mutual funds. |
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Are separate accounts known by any other names?
Yes. Separate Accounts are also known as separately managed accounts, SAMs, managed accounts, individually managed accounts (IMAs), or wrap accounts. Is a self-directed account (available at my bank) the same as a separate account? No. In a self-directed account, you are more or less on your own, defining your investment parameters, doing your own analysis, performing your trades, etc. In a separate account, your professional money manager is making your investments for you after devising your investment strategy with you. I already have mutual funds. Why should I convert these to a Separate Account? If you have investments in mutual funds, converting these to one Separate Account can be a logical, tax-wise and cost effective move. Mutual funds often contain many hidden fees, which can lower your net return. In terms of taxes, because your separate account funds are not pooled with others, you have greater control over your tax liability. In terms of stock choices, you are able to control which stocks you want and do not want to be within your investment program. You can also work more closely with your money manager, an opportunity rarely afforded to investors who have traditional mutual fund investments. What are the fees involved in Separate Accounts? Are there any hidden fees (12b fees, etc.)? Fees are generally a flat percentage of assets under management. Unlike the majority of mutual funds (especially those at large brokerage houses), this percentage may be reduced at higher levels of investment (particularly within the boutique investment groups). 12b fees do not generally fall within the scope of separate accounts. I understand Separate Account managers generally come from the mutual fund or hedge fund discipline. Which "mentality" is better suited for my separate account? Mutual fund managers are generally paid on assets managed and do not receive any incentive for positive performance. Unfortunately, for many investors, mutual fund managers therefore have more incentive to acquire assets than to provide superior returns. Many mutual funds also spend great sums of money on advertising, which comes out of their client's fees. Finally, brokers at major Wall Street firms often have financial incentives to put investors in their own firm's mutual funds, which may not be in the best interest for the investor. Hedge fund managers, on the other hand, are principally paid incentive fees in the form of a percentage of investment gains. As such, fund managers interests are more closely aligned with their clients. This incentive fees approach tends to attract money managers with a deeply embedded mind set of making profits for clients rather than simply accumulating assets. This factor alone drew many of the best and brightest money managers away from the large mutual fund brokerage houses. In addition, Hedge fund managers often pool their personal funds in with their investors, and therefore are "eating their own cooking". Lastly, as Hedge fund managers are precluded from promotional advertising, hedge fund managers are more focused on relationships and referrals, and typically have an overall lower overhead. In short, we have found that, for the investor seeking capital protection and appreciation, the hedge fund manager behavior is the more suitable and attractive. I understand Separate Accounts are being offered by both large brokerage firms and boutique investment groups. Which is better suited for my account? Bottom line, it's all about the faith you have in your money manager. Often, clients with the largest accounts have found the most comfort in boutique groups which have greater fee flexibility, less manager turnover and fewer potential conflicts of interest. Furthermore, smaller groups generally have less overhead and less pressure to acquire assets to meet this overhead, so they can truly be money mangers over money marketers. What is a Hedge Fund? Hedge funds, because of their performance based fee structure and hedging strategies, provide a means to not only grow but protect capital, being able to hedge "downside". However, hedge funds, requiring sophisticated, high net worth clientele, left many with no alternative but to stay with mutual funds. Separate accounts may be an excellent alternative for your money management needs. Why Coastwise Capital Group? Coastwise Capital, with Chief Investment Officer Scott Kyle at the helm, provides a boutique, hedge fund based approach to separate accounts; an approach with a steady track record of protecting as well as growing capital. How do I get started? Getting started is as simple as calling our offices at (858) 454-6670. We will be happy to have an initial meeting with you by telephone or in person to discuss your investment objectives. This opportunity is also available to investment professionals looking for investments for their clients. The Question…is not whether to start a separate account, but when and with whom? We hope you consider Coastwise. |
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