Custom separately managed accounts (SMAs) are not new, but the delivery standard needed to compete is. Institutional-grade controls, data architecture, and operating discipline are now the baseline for any manager trying to scale in the managed account market which is projected to reach almost $25 trillion by 2030.
Custom SMAs Are Entering Their Next Phase
Custom SMAs are converging toward institutional standards. The accounts stay separately managed, and personalization keeps expanding. What is changing is the delivery model.
The largest managers already apply governed, risk-aware, account-by-account portfolio management to institutional mandates. That same discipline is now expected in the SMA market.
The managed account market is growing fast and getting more complex. Assets reached $13.7 trillion in 2024 after two consecutive years of roughly 20% growth. SMA programs have compounded at about 18% annually over the past five years. The asset base is also shifting: equity-only strategies remain the largest segment, but their share is declining. Multi-asset, derivative-heavy, and alternative SMAs are growing, and with that growth comes a delivery problem.
The flexibility that once defined the SMA value proposition becomes a liability without institutional-grade controls. The largest managers already apply governed, risk-aware portfolio management account by account across their institutional mandates. That same discipline is now the expectation in the SMA market, and the delivery model must catch up.
Capability Gaps Are Already Binding Growth
Most older SMA platforms were built for single-asset strategies with limited customization. They struggle with diversified, multi-asset portfolios that carry varied tax, risk, and restriction profiles at full scale. For many managers, this is not a future problem. It already limits growth.
The main demand drivers are tax-loss harvesting, direct indexing, lower minimums, and service reaching a broader client base. Each pulls investment, distribution, and operations in competing directions. The complexity is increasing operational risk and stretching existing teams.
Personalization will not scale without an institutional-grade platform.
Institutionalizing does not mean copying every institutional process. It means using the ones that matter:
- Governed portfolio construction with repeatable processes
- Clear segmentation that drives operational differences
- Data built into the operating model from the start
- Risk and compliance built in at every step
- Technology that performs consistently across thousands of varied accounts
Manage the Full Account, Not Separate Pieces
A single direct-indexed SMA may hold taxable fixed income, completion overlays, structured exposures, and options-based risk management. Managing these as separate strategies bolted together afterward breaks down operationally and adds risk.
The fix is to manage the account as one unit: unified cash management, consistent tax policy, shared restrictions, and centralized exception handling.
At scale, personalization runs on complex rules. Client preferences become set parameters: restrictions, factor tilts, tax budgets, ESG constraints, tracking-error targets, and liquidity buffers. Institutional managers already work this way because it is the only way to deliver consistent results across institutional custom mandates. The SMA market is reaching the same point, often before it has the technology infrastructure to deliver it.
Single-Contract vs. Dual-Contract Programs
Program structure shapes the delivery challenge.
In single-contract programs, the manager controls more of the process, which allows tighter standardization across onboarding, restrictions, tax logic, trading, and reporting. That control also puts more responsibility on the manager to integrate across custodians and sponsors.
In dual-contract programs, the sponsor plays a larger role in client relationships, policy, and operations. That creates fragmentation: multiple sponsor rule sets, differing data standards, and variable operational boundaries. Translating each sponsor’s policies becomes a core skill. Firms that treat dual-contract delivery as just another channel struggle at scale, because they underestimate how much sponsor variation fragments their operations.
Sponsor Variation Is the Real Constraint on Scale
Portfolio construction gets most of the attention. In practice, variation across sponsors and custodians is one of the main limits on scalable customization.
Sponsor-custodian combinations determine:
- Account opening workflows and onboarding timelines
- Tax-lot accuracy and corporate action processing
- Restriction implementation and trade communication protocols
- Reporting timeliness and exception ownership
Integration governance, not portfolio design, drives growth. Firms that scale operate like institutional mandate onboarding teams: standardized controls, formal testing, data certification, disciplined cutovers, and post-launch stabilization, run repeatedly across sponsor and custodian environments.
This is where data transformation capabilities matter most. They hold a complex, multi-sponsor delivery model together.
Delivery Decides Who Captures Share
The market is growing, the client base is expanding, and strategies are becoming more complex. The firms that capture the most share will not be those with the most sophisticated investment process, but those that rebuilt their delivery models to meet the institutional standard the market now demands.
For asset managers competing at scale, the question is no longer whether to institutionalize the separately managed account (SMA) operating model, but whether to do it before platform constraints force the decision.
CrossCountry Consulting’s Asset Management practice can help redesign the delivery model that makes institutional-grade personalization scalable. To explore what that transformation could look like for your company, contact us today.