Managed accounts face uphill battle, some say

NEW YORK — As financial advisory businesses begin to adopt a wealth management model, unified managed account managers…

NEW YORK — As financial advisory businesses begin to adopt a wealth management model, unified managed account managers look to follow suit. But they face competition from other investment avenues.
An increased number of investment options in the investing landscape is complicating matters for separate-account managers as investors are gravitating toward other long-term investing choices, such as life cycle funds and exchange traded funds, said Kenneth Bigel, professor of finance and chairman of the business department at Touro College’s Lander College for Men in Queens, N.Y.
“ETFs are growing on the global stage,” he said here this month at the annual SMA conference of Short Hills, N.J.-based Financial Markets World. “There is more competition, and the separately managed accounts are going to have to compete with foreign ETFs for profits, which accounts for the higher expenses.
“It is going to be very difficult.”
As the integration into wealth management evolves, “advisers need the tools to address clients’ needs, and vendors need to know that there are many issues that have to be addressed between the front and back office of a financial institution,” said Hilary Fiorella, who
sat on the same panel. She is vice president of marketing and communications at CheckFree Corp.,
a bill payment and financial management company based in Norcross, Ga.
Due to the multiple levels of registrations and the number of custodians required by a UMA platform, “advisers will need to coordinate more between departments within financial institutions [in order to give their clients extra attention, regardless of what the platform infrastructure requires],” Ms. Fiorella said.
“Firms would like a single platform, and the industry is a ways away from a platform that covers the different areas that they manage.”
As wealth management gets closer to the retail side of the business, firms are looking for platforms that are consistent and that come together, Ms. Fiorella explained.
However, advisers need to be worried and concerned about the effect that clients’ drawing down assets on a monthly basis for living income has on their overall assets, while clients simultaneously are looking for an investment to fund their retirement and pay their bills and other expenses.
“Advisers are put into a position to preserve wealth, grow income and accommodate for drawdowns from boomers not adequately preparing for retirement,” Ms. Fiorella said.