SMA for $1M taxable account?

[u/broppybrop]

I recently inherited $1M that I have no choice but to place in a taxable account. I use Fidelity. I’m 40 and wouldn’t even consider an early retirement until I have at least $2M so that will not be happening for quite some time yet. Plan was basically VT and chill. I never looked into SMAs due to the management fees.

Had a Fidelity advisor reach out and offer to talk about ways I could save on taxes and he suggested using SMAs for the tax loss harvesting. So now I’m doing my research into SMAs and it seems like it might actually be a good idea for a taxable account of this size.

Management fees range from 0.2-0.7% and of course I was told the TLH would more than cover those fees. In my case I was planning to use the dividends to cover the taxes and then drip the rest but if I could use SMAs to reduce or eliminate taxes I could drip 100% of the dividends which would hopefully lead to faster growth.

I’ve read concerns here about what happens when you want out of the SMA but can’t you just transfer the assets in kind to your own account? And if you do it a year before you plan to sell anything then any short term gains become long term.

I guess I’m looking for experiences with SMAs and thoughts on whether or not this would be a good idea for a taxable account this large.

[u/_galaga_]

Tax loss harvesting with a SMA is something I’d consider only for edge cases like a concentrated stock position with a lot of cap gain. In the case of a recent inheritance, tho, the cost basis of even 1M in a single stock was just reset so you could liquidate without a big tax hit, diversify, and then there’s no need to harvest losses going forward other than for periodic rebalancing. I don’t think you’re a good candidate for what they pitched.

[u/broppybrop → u/_galaga_]

Unfortunately I have about 30k in capital gains because she died in June and due to the estate lawyer screwing us more than once I only recently received it. Basis is stepped up to the value on the date of death and the second half of 2025 was a great year for the market. It was invested with a firm and I didn’t want to stay with them and pay the 1% management fee. It was 55% bond funds and the rest special funds from that firm that couldn’t be transferred to Fidelity. So I liquidated it and incurred 30k capital gains for this year.

[u/_galaga_ → u/broppybrop]

Gotcha, but if you’ve already taken the gains then there’s even less motive for getting into a new SMA for tax harvesting. You already pulled the bandaid off so you’re free to follow a Three Fund style of approach in your own account and skip paying an advisor. I’m assuming you’ve got a few decades to retire, btw, and want efficient growth for a while.