SMA’s have a variety of uses.  Here are a few planning scenarios where these are great tools:

  • A couple has a wide disparity between their ages (70 year old man, 50 year old wife)
  • Traditional joint life annuities will offer very low payouts, whereas an SMA can be used to produce income for the couple’s life and a future lump sum for the surviving spouse to re-position in the future.
  • Investors seeking high yield alternatives to CD’s
  • Investors seeking specific future payment streams or lump sums, to fund education, gift, or other goals.
  • Investors seeking alternatives to the complicated contractual terms of variable and index annuities with income riders

Here are a few other possible users and ideas:

For Insurance Practitioners:

Many insurance practitioners use SMA’s in lieu of fixed and period certain annuities.  Annuities form an integral part of a well balanced financial plan, but with pervasive low rates, savers and those preparing for retirement are at a huge disadvantage.  Using higher yield SMA’s helps build a solid financial floor at an excellent rate of return, without the complexities of other annuity contracts.

For Family Offices:

Family Offices have more direct influence over their clients and generally have discretionary control over investments, however they and their clients have the same needs.  Individuals, high net worth investors, and institutions alike all have a need for solid cash flow.

SMA’s can form the core of an income plan and allow an investment manager to focus on growth opportunities knowing that core baseline cash needs are covered.

For Institutions:

As with family offices, institutions like insurance companies themselves, investment companies, even banks and credit unions, can consider SMA’s in addition to their other loan assets.  But rather than make assessments of credit quality and cash flow of their borrowers, and have risk concentrations in specific assets, institutional buyers of SMA’s can have comparable or superior yield and receive payments from payors with superior credit .

HOA and Other Saving Entities:

Using SMA’s in an HOA is an idea brought to us by one of our advisors.  SMA’s offer the ability to time future lumps sums and guarantee investment performance.  Need a $50,000 roof in 15 years? pay for it now at a discount!

There are innumerable other ways to use these assets in similar creative ways.