Managed Account
What it is:
A managed account is an investment account in which a financial advisor or other kind of money manager is responsible for managing in the best interests of a client or beneficiary.
How it works/Example:
Let's say John Doe opens a managed account with Jane Smith, who is a financial advisor. The account has $3 million of assets. Because the account is a managed account, Jane Smith is responsible for ensuring that the assets are invested according to John's wishes. Jane Smith might hold cash, assets or title to property for the benefit of John Doe. Her job is to appropriately manage the assets in the account and ensure that they are disbursed in the best interests of the client. This means that Jane Smith can buy and sell without prior approval from John Doe.
Why it matters:
Managed accounts involve fiduciary duty, which is one of the most revered and powerful aspects of the financial world. Fiduciary duty requires a person to act in the best interest of his or her clients, and when a named fiduciary does not do so, the consequences can involve civil or even criminal penalties.