Introducing the Nauman Strategic Partners’ SMA Manager Due Diligence Framework—a practical 5 Ps approach to helping financial advisors evaluate whether an SMA manager is the right fit for their clients.

Selecting a Separately Managed Account (SMA) manager is an important decision for any financial advisor.

Yet manager due diligence often starts—and sometimes ends—with performance.

How did the strategy perform?
Did it beat its benchmark?
How does it rank against its peers?

Those questions matter. But they don’t tell the whole story.

Performance tells you what happened. Due diligence should help you understand why it happened, whether it can be repeated, and whether the risks taken to achieve it are appropriate for the client.

That’s the idea behind the Nauman Strategic Partners’ SMA Manager Due Diligence Framework.

Why SMA Manager Due Diligence Matters

SMAs can give advisors greater flexibility to build portfolios around individual client needs, including tax management, values-based restrictions, concentrated positions, charitable giving, and other customization requirements.

But that flexibility also makes manager selection more complex.

An advisor isn’t simply selecting a fund or investment product. They are selecting a manager, investment process, and firm to help deliver a specific client outcome.

That requires asking better questions.

The Nauman Strategic Partners framework provides advisors with a structured, repeatable way to evaluate SMA managers beyond the traditional performance review.

It can help advisors:

• Create a more consistent due-diligence process across managers and strategies.
• Ask better questions of portfolio managers and investment teams.
• Connect manager capabilities to specific client objectives.
• Identify potential risks and red flags that may not appear in a performance report.
• Evaluate whether the manager’s story matches the evidence.
• Document the rationale behind manager-selection decisions.

Ultimately, the framework is designed to help advisors move from:

“Is this a good manager?”

to:

“Is this the right manager for this client?”

Put the Framework to Work

The Nauman Strategic Partners’ SMA Manager Due Diligence Framework isn’t intended to be just another investment checklist. It’s designed to be a practical tool advisors can use when researching managers, preparing for due-diligence meetings, comparing strategies, and documenting manager-selection decisions.

That’s why I’ve also created the Nauman Strategic Partners’ SMA Manager Due Diligence Toolkit—a collection of practical resources advisors can use to put the 5 Ps into practice.

The 5 Ps of SMA Manager Due Diligence

The framework evaluates an SMA manager through five lenses:

1. Philosophy

What does the manager believe?

Where does the manager believe market inefficiencies exist? Is the investment philosophy clear and repeatable? Does it remain consistent when the strategy falls out of favor?

Most importantly, does the philosophy align with the client’s objective?

2. People

Who is actually making the decisions?

How experienced is the portfolio manager? Is the strategy dependent on one individual? How deep is the investment team? Is there a succession plan?

A strong track record means little if the people responsible for producing it are no longer managing the strategy.

3. Process

How does the philosophy become a portfolio?

How are investments selected, sized, monitored, and sold?

How does the manager manage risk? How much discretion does the portfolio manager have? Can the process accommodate the customization and tax-management capabilities that make SMAs attractive?

4. Performance

Does the evidence support the story?

Performance should be evaluated in the context of risk.

Do drawdowns, downside capture, tracking error, and other analytics align with the stated objective?

Does the strategy behave the way you would expect?

And are there unusual periods of outperformance or underperformance that require explanation?

5. Platform

Can the firm actually deliver?

Is the firm committed to the SMA business?

Does it have the people, technology, trading capabilities, tax-management infrastructure, and client-service resources necessary to deliver the strategy?

And can it scale without sacrificing quality?

The Nauman Strategic Partners’ Test

The power of the framework isn’t simply that it gives advisors five categories of questions.

It’s that it forces advisors to determine whether the five Ps tell the same story.

If a manager says the strategy is designed to reduce downside risk, the performance analytics should support that claim.

If the strategy is highly active, the portfolio should demonstrate meaningful active characteristics.

If tax management is a key differentiator, the investment process should demonstrate how that capability is actually delivered.

If the strategy depends heavily on one portfolio manager, there should be a credible succession plan.

The story, people, process, performance, and platform should align.

That’s where the framework can provide real value to advisors.

It creates a common language for evaluating managers, a consistent process for comparing strategies, and a practical way to connect investment due diligence back to the client’s actual needs.

The Bottom Line

The goal of SMA manager due diligence isn’t to find the manager with the highest historical return.

It’s to determine whether the manager has the philosophy, people, process, performance, and platform necessary to help a specific client achieve their investment objective.

So before asking:

“How did this manager perform?”

Ask:

“What risks did they take to generate that performance—and are those risks appropriate for my client?”

That’s manager due diligence adjusted for risk.

Take the Framework With You

Want to put the 5 Ps to work in your own manager due diligence?

The Nauman Strategic Partners’ SMA Manager Due Diligence Toolkit provides financial advisors with practical resources for evaluating SMA managers across Philosophy, People, Process, Performance, and Platform—including the complete 5 Ps framework, individual due-diligence factsheets, and the SMA Manager Due Diligence Cheat Sheet.

Download the SMA Manager Due Diligence Toolkit →

The Nauman Strategic Partners SMA Due Diligence Framework