Managed Accounts Boast Strong Flows, Are You in the Game?

By Rob Klapprodt, Corporate Strategy Officer


The managed account industry enjoyed a record-breaking year in 2017, as advisory programs raked in roughly $109 billion net flows in Q4. That’s the fifth quarter in a row where inflows remained strong, topping $100 billion, according to the Money Management Institute (MMI).

By year-end, assets in managed account programs were up 26%, drawing in nearly $6.1 trillion for the year. Our partner, Edward Jones, attracted more than $73 billion in flows over the course of 2017.

Why the move to managed accounts? Why now?

The easiest explanation for the steady inflows is this: managed accounts are good for clients and good for advisory businesses. Managed accounts offer clients advanced customization, transparency, and controlled fees. They offer advisors more revenue directly from asset-based fees assessed on client accounts, enabling them to support lower-cost investment products yet still generate profits and maintain margins, according to a recent report issued by Deloitte.[1]

Growth drivers

One of the fastest growing segments of the market is the Unified Managed Account program, driven by strong adoption from industry heavyweights UBS, Edward Jones, Morgan Stanley and Merrill Lynch. For these firms, the UMA has become a central way for advisors to access a variety of different products to meet their clients’ needs. It’s like a supermarket for advisors to shop for products and vehicles, “They [advisors] look at the shelf, and on that shelf is a number of different vehicles and the differences in pricing become much more apparent,”[2] said Tom O’Shea, Director of Managed Account Research at Cerulli.

The shift towards UMA has been so significant that Cerulli recently revised its method of reporting data to include increased visibility into the different types of vehicles used within UMAs. In fact, the firm’s latest report breaks down the $965 billion in UMA programs to reflect that almost half of the assets – roughly $475 billion – are in SMAs, while $284 billion are in mutual funds, $174 billion are in exchange-traded funds (ETFs), and another $32 billion are in other types of products/securities.[3] And, while standalone SMA platforms are shrinking, separate account strategies used within UMA platforms - where they’re often accessed through model delivery - are alive and well.

Getting on the growth train

In an era of increased margin compression and regulatory pressures, we believe that more firms will transition their books away from commission-based accounts in favor of fee-based accounts. The numbers don’t lie: managed account programs continue to drive steady, predictable, and repeatable revenue - revenue that can be reinvested to fuel future growth.

Getting into the managed accounts game is no easy feat. We know because we’ve helped five of the top ten managed account sponsors roll out their managed account programs using our innovative SaaS platform. It requires the creation of well-designed managed account programs supported by robust technology. Well-designed programs coupled with advanced tech enables firms to serve more advisors, collect more assets per advisor, and enhance advisor productivity by enabling them to focus on their core services to their clients. If this is where you want to be, talk to us. We can take you there.

[2] Verbrigghe, Danielle. FundFire. “Managed Accounts Notch Another Quarter of $100B-Plus Flows.”
[3]Verbrigghe, Danielle. FundFire. “Managed Accounts Notch Another Quarter of $100B-Plus Flows.”

By Rob Klapprodt, Corporate Strategy Officer