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Wealth Managers Turn to Unified Managed Accounts to Better Serve Wealthy Clients

Unified managed accounts and unified managed households are part of a growing trend to electronically aggregate a client's holdings in as close to real time as possible. The goal of such cross-product, cross-institution and cross-individual accounts is superior portfolio management, including tax optimization and risk mitigation.

Why It's Important: Wealth managers can manage only what they can see. Therefore, the more complete a financial picture they are able to attain of their clients, the more effectively they can do their jobs. Unified managed accounts (UMAs) have evolved to allow for a more comprehensive view of an individual's investment holdings by encompassing, for example, mutual funds, stocks, bonds and exchange- traded funds in one account. Unified managed households (UMHs), designed for the $100,000 to $1 million mass affluent, allow for the aggregation of financial statements from a number of institutions on behalf of a number of individuals living in one household.

Where the Industry Is Now: UMAs are well-established and largely embraced by wealth managers as an effective way to improve overlay portfolio management by facilitating the rebalancing process. Analysts have put the UMA market at $22 billion and growing (the entire separately managed account space is estimated to be more than $730 billion). UMHs also are a reality today, but only in ultra-high-net-worth (more than $10 million in investable assets) family offices, where they are carried out manually. The main stumbling block to the type of advanced aggregation UMHs would require is the reluctance of firms to electronically open up their data to outside wealth managers.

Focus in 2007: Over the next 12 months, UMAs will grow at an accelerated clip as baby boomers cash out their 401(k)s. The coming year will see players in the UMH space continue to work with custodians to establish connections and data feeds. This will allow wealth managers to gather information electronically from a number of accounts at different financial institutions in as close to real time as possible. For UMHs to become a reality, the industry will have to re-embrace the account-aggregation craze that flared up about four years ago.

Industry Leaders: On the provider side, industry leaders include Bank of America (Charlotte, N.C.), Citigroup (New York), JPMorgan Chase (New York), Merrill Lynch (New York), Morgan Stanley (New York), UBS (Zurich) and Wachovia (Charlotte).

Technology Providers: According to Boston-based financial services research and advisory firm Aite Group, vendors of overlay portfolio management and data-consolidation technology include AdvisorPort (owned by PFPC Managed Account Services), Albridge Solutions (Lawrenceville, N.J.), Byallaccounts (a Woburn, Mass.-based wholly owned subsidiary of State Street Corp.), CashEdge (New York), Parametric Portfolio Associates (Seattle), Parsam Technologies (Memphis), Placemark Investments (Dallas and Wellesley, Mass.), Smartleaf (Cambridge, Mass.), Tamarac (Seattle), Upstream (Boston), Vestmark (Wakefield, Mass.) and Yodlee (Redwood City, Calif.).

Price Tag: The UMH concept is so loosely defined and the actual implementation of it so nascent that no solid figures exist regarding what it would take for a financial institution to bring such a strategy to market. To enter the UMA space, large financial institutions may be tempted to acquire both smaller niche financial providers in the UMA space as well as boutique technology providers that have made a play in the data-consolidation and portfolio overlay market. As the UMA certainly is a first step toward achieving UMH capabilities, providers would do well to consider offering UMAs as a precursor to eventually offering UMH services.


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