Today’s Registered Investment Advisors (RIAs) are pressed to provide deeper advice and greater customization to a much larger group of households.
At Envestnet, we believe the future of our industry will rely heavily on advisors’ ability to offer a broader set of personalized solutions, touching on more aspects of a client’s financial life and powered by an integrated platform. This perspective is echoed in a recent report from Cerulli Associates1 that looks at U.S. managed accounts and the importance of customization and consolidation working hand in hand.
Four Reasons Why Managed Accounts Make Sense
The new Cerulli report has several key takeaways from a deeper look at the opportunities separately managed accounts (SMAs) and unified managed accounts (UMAs) offer today’s advisors. Here are four:
1. Allows you to address unique client needs
According to Cerulli, in the long term, SMAs offer a greater potential to address the unique investment needs of investors than mutual funds. When it comes to socially responsible investing, SMAs have long been the preferred vehicle that allows clients to align their investments with their values.
In fact, as RIAs look to serve the needs of younger investors, research finds the preference for environmental, social, and governance (ESG) investment strategies to be growing. Three-quarters (75%) of investors under age 40 indicate they would rather invest in companies that have a positive social or environmental impact, more than twice the proportion of investors between 60 and 69 (35.9%) or those older than 70 (31.5%).
2. Delivers a better experience with consolidated platforms
Beyond the value of separate accounts as a popular vehicle for socially responsible investing, Cerulli believes firms should strive for consolidated platforms. Although priorities around portfolio construction and compliance were a primary focus in 2021, platform consolidation is a worthwhile endeavor. It can lead to a better experience for sponsors, advisors, and their clients.
3. Helps you manage every aspect of your clients’ financial life
The move to a unified managed account is an important first step toward an even greater goal: the unified managed household (UMH), where all household assets are aggregated in one location, according to Cerulli. When a client’s entire financial picture can be managed in a single brokerage account, you can deliver more integrated advice.
4. Drives focus to asset location and tax alpha
When a UMH is in place, you can focus more attention on asset location. By strategically placing investments and asset classes in the most advantageous locations across a client’s various investment accounts, you create the opportunity for substantial tax alpha.
Envestnet’s UMA Solution: Available through Tamarac
Since the launch of our SMA/UMA Solution, we have seen how UMA adoption has helped RIAs deliver client-centric investment strategies with greater precision and efficiency. Our UMA solution empowers you to enable your clients to live an Intelligent Financial LifeTM and unlocks more opportunities to personalize client portfolios with:
- A centralized SMA/UMA administration capability, all within a single and integrated Tamarac Reporting and Trading environment, where they can implement multiple SMA strategies in the context of a single brokerage account.
- Automated services that are typically handled manually, including the coordination of trading and administration across multiple manager strategies.
- Technology that makes it possible to coordinate client-specific strategies at scale, such as tax and impact overlay, loss harvesting, and direct indexing with a high degree of operational efficiency.
We can help you differentiate your practice through hyper-personalization. Connect with your Envestnet representative to discuss your unique situation and how you can unlock the benefits of Envestnet’s UMA Solution.
1. Cerulli Associates, “The Cerulli Edge, U.S. Managed Accounts Edition, 3Q 2021.”