ATI uses a Separately Managed Account (SMA) system to administer and manage its portfolios and mandates. This involves the management of individual share portfolios through a SMA structure and allows investors to own an actively managed share portfolio within a managed fund environment.

A key benefit of SMAs is the increased opportunity for the active management of client portfolios, and greater flexibility, choice and control for well-advised clients. The underlying investments are known, and have a known cost base and acquisition date. Minimisation of tax on realised gains can be planned. Aside from the taxation advantages, other benefits of managed accounts include portability, transparency, portfolio tailoring, and style purity.  

ATI is able to tax effect transactions by identifying the cost base of the parcels of shares that it proposes to sell in a rebalance or when exiting a stock position. The SMA system automatically identifies the highest cost base parcel of shares bought within the last 12 months and sells these first. Further analysis of parcels approaching the 12 months hodling period and therfore being able to attract the CGT discount and the 45 day holding rule for franking credits are also taken into account in the rebalancing process. 

Managed accounts are a portfolio investment service whereby investors have access to professional fund managers as well as comprehensive administration and reporting services.  Managed accounts are a continuation of the evolutionary process in financial services that started with unit trusts and then moved to master trusts and wrap platforms as a way for smaller investors to gain access to a wide range of professional investment services.
The goal of managed accounts is provide the individual investor with access to the benefits of:
• portfolio diversification
• professional management
• administrative control and transparency
that are usually only available to institutional, wholesale or high net worth investors.

The future direction of the financial planning industry lies in continuing the push for greater professionalism and transparency. The client’s investment goals- not investment performance- will continue to be the primary focus. Investors in the US tend to view the SMA as a ‘control account’ for all their holdings, including mutual funds, real estate investments, insurance products and limited partnerships. Clients will have even more reason to consult with their financial advisers and keep them up to date with their affairs, so that a complete financial picture- including investments not under advice- can be used to optimise their tax position. Awareness of a client’s tax situation may enable losses to be used to offset gains in other investments. One example may be the case of a client with an unexpected taxable event, such as the sale of an appreciated asset. Assets showing a loss in an SMA or IMA might be sold to generate an offsetting tax loss. This is the type of strategy that is common with direct shares, of course, and it will be very useful to see these strategies extended to managed fund investors as well.