Delegating Your Portfolio Without Giving Up Your Shares or Your Tax Control
If you’ve spent years running your own money, picking your own stocks and timing your own sells, handing any of it to an adviser can feel like a small defeat. It usually isn’t the loss it looks like. What trips people up is a quieter problem: the obvious way to delegate, the pooled managed fund, strips out the two things you probably went self-directed for in the first place. Owning the actual shares. Controlling your own tax. You can hand over the work and keep both, and that’s worth understanding before you sign anything.
When hands-off doesn’t have to mean hands-tied
There comes a point for most self-directed investors where running the whole thing yourself stops being the right call. Maybe the balance has grown to where a mistake costs real money and you’d sleep better with a professional on part of it. Maybe it’s estate planning, and you want a structure your spouse or your kids can actually manage if you’re not around. Or you simply don’t want to babysit one sleeve full-time anymore, the international allocation or the income-focused Australian equities, while you keep running the rest.
None of those reasons means you’ve changed your mind about what matters. You still want to own your shares. You still want your tax handled to suit your situation, not averaged across strangers. Delegating doesn’t force you to trade those away. The default option people reach for is what does.
What the default costs you
That default is a managed fund. Be clear-eyed about what it takes off you before you accept it.
In a pooled managed fund you don’t own shares. You own units in the fund, and the fund owns the shares. That distinction sounds academic until tax time. You inherit the fund’s single tax position, which means when other unit-holders redeem and force the manager to sell down holdings, the resulting capital gain gets distributed across everyone still in the fund, you included. You can end up carrying part of a taxable outcome you had no hand in and got no benefit from. Buy in during a bad year for redemptions and that shows up as a line on your tax return.
You also lose sight of what you hold. Most pooled funds send a statement monthly or quarterly, and between those statements you’re guessing. For someone used to logging in and seeing every position in real time, that’s a real step down, and you tend to realise how much you valued it only after it’s gone.
How a Separately Managed Account keeps what you’d lose
A Separately Managed Account leaves you roughly where you were as a direct investor. The adviser or a professional manager runs the model portfolio and makes the buy and sell calls, but the securities sit in your account, in your name. You stay on the share register owning the underlying shares. A corporate action or a dividend comes to you directly, not filtered through a fund’s pooled position.
The tax difference is the part self-directed investors tend to care about most, because you already do this yourself. Franking credits and the timing of capital-gains realisation are handled at your own account rather than smeared across a pool of other people’s decisions. If it makes sense to hold a position a few more weeks and push a gain into the next financial year, that call can be made for your account specifically. Franking credits attach to your holdings, not to a unit price that’s already absorbed by someone else’s tax event. It’s the same control you exercised when you ran it yourself, kept intact while someone else does the day-to-day work.
The visibility stays too. You can still log in and see the actual shares you hold rather than a unit balance and a fact sheet.
If you reach the point of handing a sleeve of your portfolio to an adviser and want to keep the direct ownership and tax control you had running it yourself, it is worth seeing how an advised SMA portfolio is structured in practice, from staying on the share register to excluding sectors like gambling or fossil fuels at the portfolio level, as this independent Australian wealth-management firm sets out. Solace Financial, an independent Brisbane adviser holding its own AFSL since 2013, runs client portfolios on that structure and states plainly that clients own the underlying securities and sit on the register themselves. You delegate the work. You keep the ownership.
Screening you can actually control
An SMA hands a direct investor back one more thing a pooled fund tends to bury. If you don’t want gambling stocks, or fossil fuel producers, or any other sector you’ve decided against, those can be excluded at your own portfolio level. In a managed fund you take the mandate as written, and if the fund holds something you’d rather not own, your only real option is to sell the whole fund. With securities in your own account, an exclusion is a rule applied to your holdings, not a reason to walk away from the entire arrangement.
Where the SMA isn’t the answer
An SMA isn’t the right choice for everyone, and it’s fair to say where it falls down.
If you’re investing a modest amount, the economics can favour a low-cost pooled fund or an ETF, because SMA structures usually carry advice fees and a minimum that make sense at larger balances rather than small ones. If your holdings are already tucked inside super or an industry fund and you’re happy there, unpicking that to move to an SMA may cost you more in triggered gains and hassle than the ownership and tax benefits are worth. And if you genuinely want to hand over the whole thing and never think about it again, some pooled options are built for exactly that, and the individual-account control an SMA gives you is control you may never use.
Pooled funds aren’t bad. Plenty of people are well served by them. But if you chose to run your own money because you cared about owning your shares and managing your own tax, you don’t have to surrender those things the day you decide to delegate. Know what the default costs before you accept it. Then check whether the structure you’re being offered keeps you on the register or just hands you units.
