Unified managed accounts are rapidly becoming the portfolio management model of choice for wealthier households and their financial advisors, according to Boston-based financial research and consulting firm Celent.
In the new report, Unified Managed Accounts: Developments in UMAs and Overlay Technology to Provide Total Client Solutions, Celent discusses the rise of the UMA as a technology-enabled account that offers benefits for both the client and their financial advisor. No longer just for the ultra high net worth households, according to the firm, UMAs are being utilised by high net worth households and even some high-end mass affluent households, to optimise their portfolios.
According to the report, the advantages of the UMA include open architecture and manager selection, because outside managers are run through a sieve of due diligence by the programme sponsor to arrive at a universe appropriate for the individual clients.
Costs are also lower when compared to separate managed account programmes owing to the efficiencies gained from downloading and trading models as compared to individual managers doing their own trading. In addition, more types of assets and asset classes can currently be used with an UMA that with any other type of investment programme.
Celent also believes that the future is bright for UMAs, despite
the recent slowdown in asset growth caused by the economic
downturn. Projected future developments include, by 2013, that
approximately $327 billion in client household assets will be
managed through UMAs, up from $73 billion at the end of 2008. In
fact, 75 per cent of responding technology firms expect the UMA
to surpass the SMA as the open architecture wealth
management account of choice within the next five years for
Through the addition of new asset classes in sleeves, such as real estate, commodities, or alternative investments, the UMA can one day become the unified managed household.
There is the potential to extend the UMA technology down market. Wealthier mass affluent clients may be able to take advantage of the technology through an advisor, but for the bulk of the mass affluent or even the mass market, the possibility exists to manage all of a household’s assets in a UMA in a total self-service environment.