SMA, UMA, TAMP, ILIT, IRA, UGMA; there is no shortage of acronyms in the world of financial services, and advisors are challenged every day to deliver quality planning for clients and interpret concepts that may seem foreign. With information readily available, and advisors feeling the threat of online investment options, delivery of value and deep client relationships has never been more vital.
Outsourcing investment management to institutional and boutique managers has been steadily growing, as many advisors are focusing on the client relationship and planning. With the vast array of managers available, you would be hard pressed not to find a solution that is at least equal, if not better, than what can be done alone. Now imagine if you could combine multiple managers of different disciplines, and deliver this to a client in a single account. Think of all the time you could spend developing/retaining relationships and focusing on growing your business.
The historical problem in accessing many of these managers is that it was often done through separate accounts or marrying yourself to a traditional, more limited Turn Key Program (TAMP). To paint the picture let’s assume an advisor would like a 60/20/20 allocation to a core, specialty, and alternatives manager. In the SMA world this would require three accounts, direct agreements with three managers, and operational challenges in keeping the allocation intact.
Advisors are finding the Unified Managed Account a growing pillar of their value proposition as it helps alleviate many of the operational issues with separate accounts, and provides value to both the firm and end client.
What is a Unified Managed Account?
A Unified Managed Account (UMA) is the evolution of the Separately Managed Account (SMA). An advisor can now build a sleeve-based portfolio filled with different investment vehicles (Mutual Funds, ETFs, Bonds, Equities) all under one account number at any of the major RIA custodians.
If we look back at our previous example and assume the advisor has access to a UMA platform (Adhesion), the allocation takes on a whole new light. The UMA technology creates three sleeves in which the advisor can allocate to all managers within the single account. Technology also allows for the advisor to set drift bands at the sleeve level to trigger rebalancing if the allocation moves too far away from the desired boundaries.
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As the graphic shows, the account structure is beneficial to both the advisor and the end client. Let’s take a look at some of the highlights:
• Cash Management
– With one account number it is much easier to allocate cash inflows and withdraw requests
• Easier Rebalancing
– Ability to set rebalancing bands at the sleeve level
– Eliminates transferring cash between different account numbers
- Consolidation of Accounts – Operational efficiencies with less paperwork needed to deploy desired allocation – All managers and products are housed under a single account number
- Tax Management – Managers no longer working in silos, UMA structure allows for overlay technology (like Adhesion) to perform tax aware trading and loss harvesting – Focused tax transition when moving legacy positions or replacing managers – Consolidated 1099s
• Better Value
– Many advisors see a cost savings accessing managers via our platform rather than direct with the manager
The new Department of Labor rules are prompting firms of all types to evaluate options for more consistent and compliant investment delivery. To explore how the Adhesion platform can help your business, please contact us at email@example.com