Separately managed accounts are taking up a growing piece of the product-allocation pie, according to a recent study by Reuters AdvicePoint and research and consulting firm Sway Research LLC. About 10,000 advisors across all channels were surveyed to find out what types of products they're using. The report, titled State of the Financial Advisory Industry: 2008, found SMAs make up about 10 percent of the average product allocation, behind mutual funds (40 percent) and individual stocks (16 percent). But advisors at national b/ds and wealth managers (defined here as any financial advisor with a client asset minimum of $2 million or above) make much more aggressive allocations to SMAs than the average. The national b/ds allocate 29 percent to separately managed accounts, with 17 percent to mutual funds; wealth managers allocate 18 percent to separately managed accounts and 28 percent to mutual funds. Scott Parry, general manager of Reuters AdvicePoint, says over the past 10 years or so, a lot of money managers have been dragged into offering SMAs to satisfy wirehouse appetites — even though margins are lower for the asset managers. “The fact is if [the money managers] don't, the assets are probably going to leave their mutual funds and go into somebody else's SMA product,” Parry says. Wirehouses love SMAs because they make money on the front end from the client, and on the back end because the separate accounts managers place all their trades through the firms' trading desks.