The Benefits of Outsourcing for Separately Managed Accounts (SMAs)

February 23, 2021 - Stephen Van de Wetering

Separately managed accounts (SMAs) offer many benefits, but managing them can be a challenge. Outsourcing can help.

Separately managed accounts give investors a host of advantages, and investment managers benefit financially by offering such.

Different Colored Eggs in a Basket

SMAs are increasingly popular, and SMA technology provider, DeskTrading, estimates that investments deployed through Separately Managed Accounts will double by 2023 (from 2020).

Despite the benefits, it takes more time to manage and reconcile so many individual accounts. That time eats into your profit margins.

Creating a sustainable model to support SMA activity will be up to the advisory firm, and one way to aid in that effort is by outsourcing.

Separately Managed Accounts: The Benefits of Outsourcing

Saved Time

On one hand, you want to attract more clients. The management fees are what helps to keep the lights on and provides a little extra to reward the team for a job well done.

On the other hand, with every new separately managed account, it requires more time to research the right mix of securities and sectors for the individual portfolios.

It’s difficult and/or time-consuming to reconcile a (growing) number of separate accounts because of the high degree of customization. When accounts have unique securities and transaction history, there is a less predictable formula for finding the cash and positions reconciliation breaks across all portfolios.

This means you need more time to investigate the discrepancies, and it can be overwhelming.

An experienced middle- and back-office reconciliation outsourcing provider like Empaxis thrives on this kind of work.

Removing some or all of the burden from your plate will reduce operational work overload and free up capacity. This allows more time for time for client servicing, research, and prospecting for new clients.

Saved Money

According to a Deloitte study, asset managers’ non-compensation costs, which include back-office processing and office space, account for nearly one-third of total expenses at such firms, up from 26% in 2014.

What’s more, expenses have outpaced or matched revenue growth during the past four to five years (2014-2019), while aggregate fees declined almost 20%.

Outsourcing can help alleviate the pain of fee compression.

A Schwab report revealed firms with more than $100 million in AUM that outsource data management and client reporting can reduce costs on average 25%.

Separately managed accounts can be profitable, as long as they are handled in an efficient manner. An outsourcing provider that focuses on SMA reconciliation and reporting will have the resources to do the work faster, more accurately, and at a lower cost. They’ll pass the savings on to you.


As you grow in clients and separately managed accounts, you need proper support to manage that growth.

Without the support, service levels goes down. With limited time and lots of things to work on, reporting mistakes will occur and/or reports will be delayed.

Outsourcing makes it possible to scale. As mentioned above, the service providers have the resources to handle your workloads.

If you need more labor to handle the SMA reporting, the provider can easily plug in the right people for the job. They can also employ the best technology to help with the task.

Vice versa, outsourcing makes it easier to scale down when work levels decrease.

Depending on your needs, the outsourcing provider can easily add or subtract labor to match the workload.

Portfolio Accounting Expertise

Gathering assets, servicing clients, and managing portfolios are your core competencies.

Operational work like portfolio accounting, while important, may not be the best use of your time or skill sets.

After all, those areas are non-revenue generating.

Instead, let subject matter experts handle the portfolio accounting for SMAs so you can focus on business growth and client servicing.

An outsourcing partner has the resources and talent to handle the volume and complexity associated with separately managed accounts.

Solutions for Separately Managed Accounts Reconciliation

Working with SMAs is one way to strengthen revenue streams, but the volume and complexity of such work brings challenges.

It takes time, and time is money. Furthermore, errors cost more money and time to fix.

Outsourcing is a solution for managing SMAs.

With outsourcing, you can take on more separately managed accounts and have a team of experts manage the data and reconcile the accounts for you.

It not only saves you money, but it gives you more time to focus on things you do best.

Empaxis provides reconciliation and reporting services for money managers who handle separately managed accounts. To learn more about Empaxis services, schedule a consultation.

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