Separately Managed Accounts

Separately managed accounts (SMAs) are accounts that hold individual securities an investor directly owns, managed within a professional investment strategy. In the right circumstances, SMAs can add flexibility that pooled funds can’t—especially around tax management, concentrated stock, and personalized restrictions.

At Beacon Hill Private Wealth, SMAs are one of several implementation tools we may use within a broader wealth management relationship that coordinates planning, investments, and tax considerations over time.

What is an SMA?

An SMA is a portfolio of individual securities held in your account and managed according to an agreed strategy. Unlike mutual funds and ETFs—where investors own shares of a pooled vehicle—SMAs can allow greater personalization over what is owned and what is excluded.

You own the underlying securities in the account.
The portfolio can be managed with custom guidelines (tax approach, restrictions, etc.).
Trading and implementation are handled systematically by the SMA manager, with your advisor designing and monitoring the account.

Why consider an SMA?

SMAs are most useful when a household’s situation benefits from personalized implementation rather than a “one-size-fits-many” fund approach.

1) Tax-aware implementation (when applicable)

Some SMA programs can be managed in a tax-sensitive manner using techniques such as tax-loss harvesting, minimizing short-term gains when possible, tax-efficient lot selection, and ongoing tradeoff management (including wash-sale constraints).

Important: wash-sale rules are complex. Avoiding wash sales can be difficult when similar securities are held elsewhere or when cash flows occur.

2) Concentrated stock and legacy holdings

When a family holds a large single-stock position or a concentrated portfolio, SMAs may allow more nuanced transition planning than simply selling and reinvesting. Outcomes depend on taxes, restrictions, liquidity needs, and risk tolerance.

Types of SMAs we may use

A) Direct security equity SMAs (systematic, long-only)

These are direct-stock portfolios that implement a systematic investment approach and can be tailored for restrictions and tax preferences. These strategies emphasize disciplined portfolio construction and may apply different levels of tax management depending on investor circumstances.

B) Flex SMA concepts (long/short, tax-aware designs)

Some strategies—such as long/short tax-aware designs—use leverage and short-selling and may seek to generate capital losses while aiming for market-like returns (net of expenses), with tracking variance.

Tax-managed SMA of publicly traded equities
May use leverage and short-selling to seek capital losses
Generally designed to seek market-like returns net of expenses, with tracking variance

These approaches generally aim to defer, but not eliminate, capital gains taxes and should be treated as long-term holdings. They can introduce meaningful operational and reporting requirements, and tax results vary by investor circumstances.

What “customization” can mean in practice

Customization is best understood as guidelines and constraints agreed in advance, not as one-off trading requests.

Choice of tax-management approach
Company, sector, or country restrictions
Employment and trading constraints

Tradeoffs and risks to understand (plain-English)

SMAs can add flexibility—but they also add tradeoffs. Depending on the SMA strategy and tax approach, common considerations include:

Market risk and loss of principal: investment values fluctuate.
Customization constraints: exclusions and screens can limit the opportunity set.
Tax rules and uncertainty: wash-sale and tax outcomes are complex.
Tracking variance: some SMAs may not track a benchmark closely.
Added complexity: increased operational and reporting requirements.
Leverage / short-selling risk: higher expenses and complexity for certain strategies.

How an SMA fits inside your portfolio

At Beacon Hill, an SMA is typically considered after we understand your broader balance sheet and planning priorities.

Assess fit
Select strategy type
Set guidelines
Implement and monitor

Employer stock, concentrated positions, and restrictions

SMAs can be helpful when a household has employer stock exposure or legacy concentrations.

Concentration management
Trading restrictions
Household coordination

What SMAs may not be ideal for

Account sizes below strategy minimums
Limited benefit from personalization
Costs outweigh expected benefits
Short time horizons or frequent cash flows

Who tends to benefit most from an SMA?

High tax sensitivity
Concentrated stock holdings
Specific trading or employment restrictions
Preference for direct ownership

Fees and minimums

SMA fees and minimums vary by strategy and platform. Specific fees and minimums will be provided in writing prior to implementation.

Disclosures

Information on this page is provided for general informational purposes and does not constitute investment, legal, or tax advice. Advisory services are provided only pursuant to a written agreement. Investing involves risk, including loss of principal. No strategy can guarantee a profit or specific tax outcome. For additional details, please review our Form ADV.