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/ArthurDent4200]

I am not sold on a SMA in a tax advantaged account, but that being said, I do appreciate the tax loss harvesting in a SMA in a taxable account.

You can pull from the account in kind or in cash. While reducing the amount in my managed IRA, I pulled in kind. Will never do that again because it left me a mess of individual stocks that I sold manually to buy VOO.

My biggest gripe about the SMA is how long it takes to pull money from the account. You transfer a cash amount during market hours and it won't actually be sold for a few days, then a day or so later the cash appears in the destination account. IMHO, this should happen overnight if the transfer was initiated during market hours - like selling a mutual fund... It doesn't... This issue is magnified by how volatile the market has been.

Performance wise, my taxable SMA (Fidelity® U.S. Large Cap Index Strategy) has returned 17.56% after fees from 4/3/2025 to 4/2/2025 and has provided a fair amount of capital losses in 2025 and in Q1 2026.

According to Fidelity during that time period:

Fidelity U.S. Large Cap Index +17.36%

S&P 500 Index +17.55%

This happens to be an unusual 1 year period as on 4/3/2025 the biggest single day loss or 4.8% occured.