Pros and cons of managed account services?

I've been approached by FA on managed account services. From what I've read, it is bundled and diversified portfolio of investment from stocks, REITs, unit trusts, bonds. It will be managed by a portfolio manager who will manage the portfolio on discretionary basis. My questions are

What are the pros and cons of managed account services?
What is the management fee, commission fee rate of portfolio manager which the investor has to fork out?
Will the fees actually eat up on the returns?

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Kelly Trinh

25 Dec 2019

Backoffice technical at financial services firm

In a conceptual sense - I could tout the same services, I'll manage your portfolio for a 2% fee. Perhaps I choose the investments by throwing darts at a stocklist I pin to a dartboard. After a year, if your portfolio is up, I take credit for the win. If it is down, I say markets work like that and enjoy the free money.

That's a bit of a long winded way of saying that it is really hard to align the incentives for a managed account model. I guess that is why such models are still a bespoke niche type offering.

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