The stranglehold on the distribution of separately managed accounts by a handful of wirehouses has again driven down fees paid to equity investment providers. Recently, Wells Fargo reportedly cut its SMA equity management fees to 36 basis points from 38 basis points, and experts believe that other national distributors are likely to follow suit.

Many asset managers have the size and liquidity to survive the downturn in fees, but experts worry that investment providers with limited portfolio capacities -- such as small-cap, mid-cap and international strategies -- could turn their backs on the SMA business and invest their limited resources in higher-profit investment vehicles. Mutual funds, institutional accounts and SMAs that invest in larger cap equities are three types of investment vehicles with higher profit margins.

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