How do I open an account?

You need to take a risk assessment questionnaire and be provided with the required disclosures. Once the evaluation process is complete, to set up a managed account you simply fill out the forms for the company that you choose to manage your money, as well as the custodian bank forms.

How do you select the right one for me?

There are 5 key ingredients that go into a successful selection for a managed account. In no particular order:

  1. Risk tolerance
  2. Time horizon
  3. Cash flow
  4. Liquidity
  5. Taxes

By taking a quick survey of your objectives and evaluating your individual investment temperament, the right choice(s) become apparent.

What are the costs and fees?

No fee to establish the account. Most individually managed accounts are about 2% of the account value annually, generally assessed quarterly. Depending on the type of account, there could be a minimal trading fee if the money is held at Schwab Institutional.

Can I change if I don’t like my selection?

Absolutely. Just a little paperwork to fill out to switch. With no fees to enter or exit, there is no disincentive to stay in a position you are not happy with.

What are the account minimums?

Ranging from $25,000 to $100,000 depending on the management company.

Can my IRA or 401(k) be managed?

Yes. The exception is most 401(k) plan sponsors will not allow 3rd party management of the current contributions. Some will allow self-directed options and if the platform is Schwab, most likely you can get it managed. Old 401(k) money that has been rolled forward to a current employer can be rolled out to an individually managed IRA.

Can my annuity or life insurance be managed?

In some cases yes. It depends on the provider.

What prevents another Bernie Madoff?

Great question! Here’s a great answer. All of the firms that HK Wealth Management, Inc. engages for 3rd party managed accounts have a custodian bank to hold the assets and provide a platform for management. These companies are names you probably have heard of like Schwab, TD Ameritrade or Pershing (Bank of NY). The management companies can only do 3 things: Trade the account, extract the management fee, and send money to you at your request.

Really… what are the risks?

All investments carry some degree of risk. Even cash in your mattress has a tiny bit of risk. The key is to try to get a better return on your money while incurring the least amount of risk. This may sound impossible, but in a successfully managed account, this is quite possible more than you might think. Evaluating the risks of any managed account and explaining the methodologies used are key to giving the investor the sufficient comfort level so they can sleep well at night. Nearly all funds or strategies have a measure of risk and volatility called “beta.” The value of “beta” for the SP500 index is assigned at 1. If an investment carries a higher beta value than 1, it’s more risky than just owning shares of the open market index. If an investment has a beta value of less than 1, it is inherently less risky than just owning shares of the open market index. When you evaluate an investment, if the performance has exceeded its index and its beta value is less than one, then by definition you have obtained better return with less risk. Many of the management companies that HK Wealth Management, Inc. engage for our clients achieve this, even in down market cycles.

Another important note! None of this means that there won’t be a down day, week, month or quarter in your account. There could even be a sideways year in the broad markets which your account could be somewhat up or down, or just seem to go nowhere. Even in a successfully managed account, this can happen. Overall though, there are many management companies that consistently outperform the markets with reduced risk.