MM89 Issue

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UNDERSTAND YOUR INVESTMENT SMA OR IMA – What do they mean? When it comes to investing, most of us have experienced or heard stories of great success or of great failure. However, amidst the economic turmoil, an evolving investment advisory industry and technological innovation, investors are now benefiting from the rise of Independent Financial planners and superior investment options. Traditionally, most investments, including superannuation, were accessed via a pooled investment vehicle, such as a unit trust or managed fund with direct share investments. These vehicles expose you to the irrational behaviour of other investors, are not transparent, may have liquidity issues and tax consequences are outside of your control. Buying into a managed fund with substantial unrealised gains means that if the fund suddenly sells those assets, you may get a surprise tax bill. Separately Managed Accounts (SMA’s) and Individually Managed Accounts (IMA’s) are more recent options gaining prominence. Clients maintain beneficial ownership of the direct shares, which is key, however, there are distinct differences. An SMA is a product – each investor gets the same model portfolio An SMA client invests in a model portfolio managed by a professional investment manager. Each investor in the SMA holds the same stocks (subject to some trading cost rules), so when the SMA portfolio manager changes the portfolio, the change is made to all investors’ portfolios, irrespective of their capital loss or gain position or taxation consequences. SMA’s are accessed via a platform. Usually, a financial advisory firm will pre-select their preferred professional SMA Manager and a platform that provides the administration and reporting. The financial advisory firm may ‘white label’ an SMA Manager under their own brand. An IMA is a service – each investor’s portfolio is individual and tailored for them. IMAs provide a superior approach to portfolio management which may be described as “bespoke” or “tailored” for each client. While IMA portfolio’s may ultimately hold common stocks, each portfolio is considered, built and maintained on an individual basis. You also have the option of retaining existing equities and they can be transferred in and out without triggering a capital event.

Every share purchase or sale is individually considered for every client. And when you consider the adage that two of the most important aspects of investing are “what you paid for it and what you sell it for”, this becomes a very significant IMA attribute. In contrast, SMAs are mandated to buy into the model portfolio regardless of price when a client invests. Having greater control, transparency and flexibility allows for superior risk management and taxation outcomes, and these investment methodology attributes are the backbone for better risk vs reward returns. An IMA Portfolio service suits investors that value personalized service and are concerned about capital preservation. m Disclaimer: This information has been prepared by Financial Planners Alliance Pty Ltd, ABN 89 610 060 985: AFSL 485276. Financial Planners Alliance Pty Ltd, Arch Financial Planners and Jayne Graving accept no obligation to correct or update the information or opinions in it AND accepts no responsibility for any loss suffered by any person arising from reliance on this information.. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision.

JAYNE GRAVING Arch Financial Planners

Jayne is a Certified Financial Planner, holds a Graduate Diploma in Financial Planning and brings a unique blend of qualifications, competence, ethics, passion, genuine client care and 22 years of experience to her Independent Financial Planning practice. The value this provides is evidenced by Jayne’s loyal long-term clients and the collaboration with local professionals. Jayne’s membership and involvement in industry bodies, demonstrates her commitment to best practice solutions and professionalism. Bespoke, individualized portfolio management is a highly regarded, specialized service.

IS THIS YOU? Sold an Asset (eg business, property) Received a lump sum (eg inheritance, defined benefit super, insurance) Interested in professional share portfolio management solutions A SMSF Trustee needing research, support or a full-service solution Disillusioned with institutional Financial Planning Concerned you are taking too much risk by borrowing Wanting an advocate; clarity and confidence in your financial future




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