The marketplace is naturally segmented into specific categories from an average investor’s perspective. There are online brokers for investors who want to have complete control over their investments, 401(k) investors who exclusively use their employer-sponsored retirement accounts as their entryway into the markets, and investment management for those who prefer to work with a financial professional to help them reach their financial goals.

Loaded mutual funds are the most popular investment choice for investors who take the professionally managed route. They provide access to professional money management for those willing to pay the associated mutual fund load fees. However, managed accounts are an alternative to loaded mutual funds. They allow investors to work with financial professionals while avoiding the restrictions of typical retail mutual fund investing. Using a managed account can dramatically increase the number of investments and investment types available to an investor.

Managed Account Basics

When you open a managed account with a financial advisor or investment manager, you enter into a contract where the financial professional serves as a fiduciary. In simpler terms, that professional must always act entirely with your best interests at heart and legally cannot allow third parties to influence their advice. This is one of the most significant negatives to working with firms that sell their own proprietary mutual funds.

From an investment perspective, rather than paying front-end loads (typically upwards of 5%) or similar fee schedules on retail mutual funds, a wrap fee is attached to your assets. In this type of fee schedule, the financial professional receives a commission on a particular percentage of the assets being managed. The advisor is incentivized to maximize account performance by charging a higher fee as assets increase in value.

Also, since you are not relegating yourself to an individual fund family to minimize mutual fund load expenses, you can use the entire spectrum of the investment landscape – including most fund families, ETFs, individual stocks and bonds, and a variety of other choices – within the managed accounts without worrying about load fees.

Pros and Cons of Managed Accounts

The fiduciary obligations involved with a managed account work in an investor’s favor since the advice should be free of outside influence. As previously stated, managed accounts significantly expand the number and scope of investments available to most investors.

However, managed accounts are not appropriate for everyone. From a cost-efficiency perspective, a typical, retail-oriented, loaded group of mutual funds can be more cost-effective over the long run, particularly as more assets are accumulated, triggering higher breakpoints and lower costs.

When deciding whether or not to use managed accounts, it is important for every investor to weigh these pros and cons to see which option is most appropriate for their specific needs. 

Is your financial advisor acting as a fiduciary on your behalf, or are they being persuaded to sell you proprietary funds or insurance products on behalf of their employer? Still confused or unsure? We’re here to help! Simply click here or call (763) 445-2772 to schedule a complimentary consultation today!

This content was updated September 2026