An IMA, or Investment Management Account, is an investment account you own but a professional money manager runs on your behalf. You deposit funds, set your goals and risk tolerance, and the manager handles the day-to-day buying and selling of stocks, bonds, and other securities inside the account. The key distinction from a standard brokerage account is that someone else is making the trade decisions for you, within guidelines you agree to upfront.
How an IMA Works
When you open an IMA, you sign an agreement granting a financial manager discretionary authority over your portfolio. “Discretionary” means the manager can buy and sell assets without calling you for approval on each trade, as long as those decisions align with the investment objectives you’ve outlined. You still own the account and everything in it. The manager is acting on your behalf, not pooling your money with other investors.
This arrangement creates a fiduciary duty. The manager is legally required to act in your best interest, not their own. If they fail to do so, they can face civil or criminal penalties. That fiduciary standard is a meaningful layer of protection and one of the reasons investors choose managed accounts over simple brokerage relationships, where the standard of care can be lower.
You’ll typically start by discussing your financial goals, time horizon, income needs, and how much risk you’re comfortable with. The manager then builds a portfolio tailored to those inputs. Over time, they’ll rebalance holdings, respond to market shifts, and adjust the strategy as your circumstances change.
What You Actually Own
Unlike a mutual fund, where your money gets pooled with hundreds or thousands of other investors into a single fund, an IMA gives you direct ownership of the individual securities in your portfolio. If your manager buys 200 shares of a particular stock for your account, those shares belong to you personally. This structure is sometimes called a separately managed account, or SMA, and the terms are often used interchangeably with IMA.
Direct ownership has real practical benefits. The biggest one is tax efficiency. Because you own each position individually, your manager can sell specific losing positions to offset gains elsewhere in your portfolio, a strategy known as tax-loss harvesting. In a mutual fund, you have no control over when the fund manager realizes gains or losses, and you can end up owing taxes on gains you never personally benefited from. With an IMA, the tax management is built around your personal tax situation.
Fees and Account Minimums
IMAs charge an annual management fee based on a percentage of the assets in your account, rather than per-trade commissions. This fee typically ranges from 0.25% to 2% per year, depending on who manages the account and how much you invest. A human financial advisor generally charges around 1% annually, while automated or robo-advisor versions of managed accounts often charge 0.25% to 0.50%. On a $100,000 account, that translates to roughly $250 to $500 a year for a robo-advisor, or about $1,000 for a traditional advisor.
Account minimums vary widely. Robo-advisors often have no minimum or a very low one, making managed investing accessible to beginners. Traditional IMAs run by human portfolio managers at major firms tend to require higher minimums, sometimes $25,000 to $100,000 or more, particularly for accounts that hold individual stocks and bonds rather than funds.
The percentage-based fee structure aligns your manager’s incentives with yours. When your account grows, they earn more. When it shrinks, they earn less. That said, the fee comes out of your account regardless of performance, so it’s worth comparing what you’re paying against the value you’re getting.
Discretionary vs. Non-Discretionary Accounts
Not all managed accounts work the same way. In a discretionary IMA, the manager makes trades without needing your sign-off each time. In a non-discretionary arrangement, the manager recommends trades but you approve or reject each one before it goes through. Major firms like Merrill offer both models, letting you choose whether you or your advisor manage the day-to-day investment decisions.
Discretionary accounts are more hands-off for you, which is the whole point for most IMA investors. Non-discretionary accounts give you more control but require more of your time and attention. If you want a true “set the strategy and let the professional handle it” experience, discretionary is the standard choice.
Where to Open an IMA
IMAs are offered by a range of institutions: full-service brokerages, private banks, independent financial advisory firms, and online investment platforms. The experience differs depending on where you go. A full-service firm pairs you with a dedicated advisor who builds and manages a custom portfolio. An online platform may use algorithms to manage your account based on a questionnaire you fill out, with limited human interaction.
Some firms also offer programs where your advisor selects a third-party investment manager to run a specific strategy within your account. In these setups, you might have one advisor coordinating your overall financial plan while a specialist firm handles the actual portfolio management for a particular asset class like international stocks or fixed income.
Who an IMA Is Best For
An IMA makes the most sense if you want professional portfolio management but also want the benefits of owning securities directly, particularly the tax advantages. Investors with larger portfolios tend to get the most value, since tax-loss harvesting and customization become more impactful as account size grows. If you have strong preferences about what you do or don’t want to own (avoiding certain industries, for example), an IMA can accommodate that in ways a mutual fund cannot.
For smaller balances, a low-cost robo-advisor offering a managed account structure can provide many of the same benefits at a fraction of the cost. The core concept is the same: you set the goals, a professional (or algorithm) manages the investments, and you pay an ongoing percentage-based fee for the service.