There are obvious benefits of an ADM for a client. An ADM provides access to a professional manager and his or her research capacity with the benefits of direct ownership of shares. Unlike a managed fund, each client can see exactly what investments in their portfolio are. Tax events and transaction costs are not distributed among clients and the cost base of the client investment is the date of their investment in the model portfolio. In addition, a portfolio of models is generally a portfolio of high conviction, with the total number of holdings in the model limited to 20 to 25 securities, whereas in a fund under management, the number of securities is generally not indicated and is generally much larger. Finally, since an SMA model is managed on a platform, the client does not have to manage the commercial, commercial or administrative actions of his portfolio. Clients benefit from online access to their portfolio of models and regular tax reports. The client pays an investment management and management fee. The agreement should stipulate that the advisor provides his services in accordance with all laws and regulations. The agreement may also specify specific requirements, such as the registration of the advisor under the Federal Investment Advisors Act 1940 or under state law.
The agreement should designate the custodian who holds the assets in the account. The custodian should be a serious financial organization, for example. B a large bank or brokerage company, and be independent of the advisor (again to avoid the madoff situation). If the advisor recommends a particular director, he or she must explain the basis of his or her recommendation (for example. B lower costs, better services or the advisor`s familiarity with the trustee`s staff and systems). The advisor should also be willing to work with the administrator you are currently using or prefer in another way. The agreement or annex to the agreement should include investment guidelines under which the account is managed. These guidelines should not only define the account`s investment objective (for example. B the valuation of capital), but also all investment allocations (. B for example, a target of 60% equity and 40% debt) and investment restrictions (for example, no more. B of 20% in foreign securities, only investment degree debts, no derivatives).