Managed Accounts: Exploring Their Limitations

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If you’re looking to move into professional money management, you’ve likely considered managed accounts.

It’s understandable why. Managed accounts is a viable route for traders that want to manage the money of one or two clients.

How Do Managed Accounts Work?

The way managed accounts work is simple. Your client will typically have an account with a broker. This client will then give you ‘power of attorney’ access to that broker account – allowing you to trade on their behalf.

However, remember – the client is always in control in this structure. They can revoke access and withdraw capital at any time.

A Better Option?

But here’s the problem: a managed accounts structure is inefficient and difficult to scale. So if wealth creation is your real goal, creating an investment fund is the better option.

Let’s explore why.

Firstly, the managed accounts structure is only effective if you have a small number of clients (less than three). Can you imagine placing trades in multiple broker accounts? Coordinating an effective trading strategy in this scenario would be next to impossible.  

Next is the challenge of administration. In a managed account structure, you still need to regularly update your client with reports. Again, doing this across multiple broker accounts is extremely time-consuming.

So what’s the solution? My recommendation is an investment fund – which allows you to trade all of your clients’ funds in the same place.

This structure means you can focus on implementing your single best strategy for each of your clients. Plus, your administration will be taken care of by your fund administrator.

You can create your own investment fund for less than $10,000. If you’re ready to create your own investment fund we should talk. Just email me and I’d be happy to arrange a call with you.