Banks, small brokers and even independent advisers are increasingly offering separately managed accounts, hoping to put a dent in the 80% market share that large brokerages have on the industry, The Wall Street Journal reports.
Whereas SMAs traditionally have charged fees of between 1% and 3% and required minimum balances of $100,000 to $250,000, new technology that automates the investing process is permitting banks to offer SMAs for annual fees of as little as 40 basis points. In some cases, the threshold to invest is as a mere $25,000.
But big brokerages are fighting back, arguing that they offer better-quality investment choices and truly personalized service. They are also offering separately managed accounts that are better diversified, even some that include exchange-traded funds.
It's no wonder that other financial institutions are hungry for this business, with the number of SMA accounts standing at 2.3 million as of March, up from 1.7 million in 2001. Assets, now at $736.4 billion, have doubled over the past five years and are projected to surpass $1 trillion by 2009.