Managed Accounts Leverage Workflow Technology

Terry Flanagan

The growth of separately managed account (SMA) programs is fueling the demand for integrated tools that provide efficiency as account volume increases.

As the asset management industry has matured, it has attempted to modify the delivery mechanism of managed accounts to offer more complete asset allocation and investment advice delivery.

The latest iteration of this modification is the Unified Managed Account (UMA), which uses a single account to offer investors a full asset allocation and access to multiple SMAs and mutual fund sub-asset classes or styles (e.g., large-cap value).

Technology plays an important role in successful managed accounts and UMA businesses.

Processes that fall under the UMA category include account administration, reconciliation, performance reporting, statements and billing.

“Wrap” managers oversee an investor’s portfolio for a flat quarterly or annual fee that covers all administrative, commission and management expenses. These businesses, also known as SMA programs, can be an effective way for asset managers of all sizes to increase assets and capital.

However, managers must manually extract data from an order management system and upload the information to a wrap sponsor platform in order to execute each trade, which creates operational inefficiencies.

SunGard and Advent Software, providers of software and services for the financial services community, have introduced an integrated trading solution that helps “wrap” managers conduct business with sponsors directly via the SunGard Global Network and Advent’s Moxy order management system.

“The centralized and automated system helps firms expand their separately managed account business more quickly, increase efficiency and reduce costs and errors,” said Ralston Roberts, senior managing director for the SunGard Global Network business unit.

To date, the success of the UMA has been modest, compared to more established managed account products. Inflows to traditional legacy managed account products outpace UMAs by a multiple of four to one, according to research firm Cerulli Associates.

Advisor acceptance of UMAs and other third-party advised products is weak, and advisors indicate a strong preference for products where they maintain greater responsibility and control.

“UMAs are typically delivered as yet another managed account silo with the asset allocation, product selection and rebalancing controlled by a single third-party investment advisor, called an overlay manager,” said Andrew Clipper, North America head of wealth management services at Citi Investor Services.

For example, a typical distributor or sponsor of managed accounts might have upwards of five or more different product programs (wrap funds, wrap ETFs, rep-as-advisor, traditional SMA and UMA).

“This silo-based approach is difficult for financial advisors, confusing to investors and causes a plethora of extra accounts and processes beyond what investors would otherwise require,” said Clipper.

Citi’s Wealth Management Services provides OpenWealth, a wealth management featuring advisor-controlled UMA capabilities.

“The industry needs to enable financial advisors to play what is now known as the role of overlay manger,” said Clipper.

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