Catch the UMA Wave or Risk Missing the Boat Altogether

July 8, 2011 | Share Unified Managed Accounts continue to gain momentum and firms that have implemented UMA programs have enjoyed significant growth. According to Cerulli data, assets in unified managed accounts had jumped to $129 billion at the end of the first quarter from $80 billion in 2010. That kind of growth isn't a rising tide, it's a tidal wave. Firms who fail to develop and implement a UMA strategy risk missing out on a clear growth driver for the next few years.

The good news is that it's easier than ever before for financial firms to launch UMA programs. It's becoming common now for UMAs to go from drawing board to launch in as little as 90 days. Also, the flexibility and diversity of programs means UMAs can fit any firm's business model, and there is room to tailor UMAs to suit specific niches to differentiate form competitors.

From our vantage point, we enjoy a unique perspective on the entire spectrum of programs. Vestmark is a benefactor of the surge in UMA business and this year eclipsed $250 billion and almost 1.5 million individual accounts on our platform. We quietly (as required by our clients) serve some of the world's largest banking and investment firms, broker dealers, asset management and private banking firms, wealth managers and mutual fund companies. We also serve the nation’s largest independent broker-dealer and overlay manager as well as the one of the fastest growing advisor-owned financial service firms for RIAs.

This exposure to so many different platforms and approaches enables us to identify some interesting trends and best practices for the development and execution of UMAs, and assist firms in pinpoint the best approach for them. Based on our work developing, launching and supporting UMAs, we’ve developed essentially a decision tree to determine the structure a given firm should choose:

• How active will financial advisors be in the UMA process? Can they:
  
  • Determine asset allocation targets?
  • Choose the investment vehicles (eg, mutual funds, ETFs, or separate account strategies) within the UMA sleeves?
  • Pick individual securities within a UMA sleeve?
• Who will be the overlay manager?
  • The advisor?
  • A central investment team?
  • A 3^rd party?
• What asset classes will be available?
• How can money managers communicate and implement their strategies?
  • Send a model portfolio?
  • Actively trade their sleeves?

We'll explore these topics, among others, in more detail within this forum.