What is an Actively Managed Account? 

An individually managed account is a professionally managed portfolio of securities owned directly by the client.  Unlike mutual funds, assets are not commingled along with those of other investors.  This distinction allows for the account holder to obtain individualized cost basis for tax planning purposes and the ability to customize the investment features of the account to better reflect the client’s preferences. Individually managed accounts seek to combine the benefits of professional money management with the flexibility, control and potential tax advantages of owning individual securities. 

Why Individually Managed Accounts?

Individually managed accounts provide a number of advantages for investors, including:


Each client’s account is managed individually. This allows portfolios to be constructed based on the investor’s specific financial targets.  Investment objectives and risk tolerance can be more carefully considered in building an individually managed account than in a pooled fund environment. 

Tax Sensitivity

Tax efficiency is perhaps the strongest argument for individually managed accounts. Investors in mutual funds can be exposed to unanticipated tax liabilities resulting from excessive trading or from capital gains achieved prior to the investor’s participation in the fund.  The effect of taxes can have a significant impact on a portfolio’s overall performance.  According to data from Standard & Poor’s, taxes on investment earnings would have negatively impacted the annual return on large cap stocks by 2.76% and long-term government bonds by 1.52% for the period beginning January 1, 1926, and ending December 31, 2002. Individually managed accounts can help minimize tax liability by managing securities with the individual investor’s tax consequence in mind.  Gain realization can be delayed in order to benefit from the lower, long term tax rates, or losses can be harvested to potentially nullify an anticipated tax liability.  Additionally, individual securities that have appreciated significantly can be used for tax- efficient gifting. Gifts of securities may be allotted to family members in lower tax brackets or to fulfill a pledge to a charity.  Charitable gifting can create a substantial income tax deduction while avoiding capital gains on the appreciated securities. 


Investments are allocated across a variety of investment styles and disciplines in order to provide broad exposure to an assortment of asset classes and to help mitigate value fluctuations over the course of the market cycle. 


A client is always aware of the investments held in his or her individually managed account.  The client receives a monthly statement and quarterly performance review, along with copies of all trade confirmations that occur within the account.  With mutual funds, months can pass before an investor receives information on what specific securities are being held.  This difference becomes important to an investor seeking to avoid a particular industry or sector.  

Social and Personal Preference Consideration: With individually managed accounts, investors are able to request screenings that allow their portfolio to be aligned with strongly held moral, ethical, environmental or social concerns.  Furthermore, portfolios can be constructed, taking into consideration restricted and/or overweighed holdings or industry allocations in order to counter correlate the impact these securities may have on the overall portfolio.  With pooled investments, such preferences are impossible to monitor or enforce.  

Reduced Exposure to Investment Flows

When markets fall, mutual funds can suffer large net redemptions.  These redemptions force mutual fund managers into selling securities, often at the lower end of the market cycle.  The reverse occurs in a rising market, when managers are pressured to invest large investment flows, often at higher valuations.  Investors in pooled accounts suffer from negative externalities, whereby, the action of one investor directly impacts the return to another investor within the same mutual fund.  These negative externalities can take the form of pricing momentum, lower investment quality, higher tax liabilities and redemption obligations.  While all investors are ultimately affected by the universe of investors, or the market, individually managed accounts may help reduce many of the negative externalities associated specifically with pooled assets.  

Individual Market Entry and Exit

With individually managed accounts, security sale and purchase points can be carefully selected or targeted.  This not only provides an opportunity for enhanced returns but also results in a cost basis and a profit/loss that is unique to the individual.  Pooled accounts, in essence, allocate the average cost basis and gain/loss to the individual at the time of the security’s disposition. This may result in the mutual fund investor sharing the tax liability on gains from which they did not fully benefit.  

Exclusive Service

We are committed to providing clients with diligent financial advice and asset management.  Clients can expect a level of access and communication which has previously been reserved for only the most affluent investors.  Our mission is to provide consistent and well-reasoned investment advice to help our clients in meeting their personal financial objectives.  

Advisors seek to understand clients’ specific financial circumstances before tailoring a customized portfolio to meet their needs.  The advantages of individually managed accounts mean nothing if this understanding is misguided and incomplete.  Therefore, our philosophy and methodology for management revolve around this central theme of first understanding the client, then following a stated investment process to meet the understood objectives.

1 Source: Standard & Poor’s, Center for Research in Securities Prices at the University of Chicago, assumes 31% tax rate.