Time for second look at SMA platforms

Independent advisers who are interested in separately managed account platforms but have always thought they were too expensive may want to take a fresh look at what is out there today.

Several providers are adopting lower minimums, reduced fees and other perks targeting advisers.

Eqis Capital Management Inc., for example, is rolling out a custom branding program for advisers on its platform. The Oakbrook Terrace, Ill., turnkey asset management provider offers firm-specific branding on investment proposals, online performance reporting, monthly statements and even customizable web portals.

The offerings are free to advisers that place $2.5 million in customer assets on the Eqis platform by Nov. 30.

While it is the combination of an annual platform fee of 0.35% to 0.95% and the $25,000 account-opening minimum that attracts most advisers to Eqis’ platform, some cite other noteworthy features.

Those include the ability to create an analytical investment proposal and investment policy statement quickly, and the ability to assign multiple money managers to a specific allocation. They also include a customer relationship management system and automated billing, both available free of charge.

Jeff Gollehon, owner of JG Financial Consulting LLC of Aberdeen, N.C., investigated six different platforms before choosing Eqis’.

“The fees associated with SMAs were definitely a big concern of mine, but the low minimum investment was a big draw as were the low fees and the customization they offered,” said Mr. Gollehon, who oversees $25 million in assets.

“One of the biggest factors for my practice is eliminating redundancy and duplication of fees. If you go with one of the big custodial managed funds … where you’re in a growth portfolio, you might own Google [Inc. of Mountain View, Calif.] in six of them and then pay to sell it six times, based on the trading costs,” he said.

Technology from Eqis and other SMA providers makes it much simpler to meet some specific investment requirements of clients.

For example, advisers now have the ability to screen for socially conscious funds. They can also drill down in a portfolio to screen out investments in firearm or tobacco companies, for example, Mr. Gollehon said.

Advances in SMA technology also allow advisers to purchase fractional shares, thereby allowing investors to make smaller investments than in the past.

Individually, the features Eqis offers aren’t new. For example, Denver-based Curian Capital LLC offers the same $25,000 account minimum, while the ADVISORport platform from PFPC Worldwide Inc. of Wilmington, Del., already provides private-labeling customization.

But bundling these features, as well as several others, is new.

Some advisers remain skeptical of SMAs.

“It is almost impossible to get a response from the SMA providers on my custodian’s platform. I have been relatively successful with negotiating my own contracts with small firms,” said Bedda D’Angelo, president of Fiduciary Solutions in Durham, N.C., which has $25 million in client assets under management.

Regional regulatory issues can also come into play.

“The big issue is that I am a North Carolina-registered investment adviser,” Ms. D’Angelo said. “Even though my primary services are comprehensive financial planning and wealth management, North Carolina deems all fees collected by an investment adviser as investment management fees. Advisers who hire SMA managers are deemed to be double dipping to the consumer’s disadvantage.”

SMAs are becoming more capable than ever in meeting the needs of independent advisers, said Bill Crager, president of Envestnet Asset Management Inc., a Chicago-based provider of wrap account platforms for independent broker-dealers.

“Just a couple years ago, it was very difficult to keep the costs among the pieces within the platform consistent from a pricing standpoint,” he said. “We’re a lot closer than we’ve ever been, especially in terms of catching up to what the wirehouses are doing.”

While SMA providers originally were built around a particular product, that state of affairs has evolved into more-well-rounded offerings from his company and others, Mr. Crager said.

“SEI [Investments Co. in Oaks, Pa.] built their business around mutual funds,” he said. “Lockwood [Advisors Inc. in Malvern, Pa.] built theirs around the separate-account mode.”

Still, some advisers remain dubious.

“The biggest selling point on an SMA platform is the ease of administration — if you can get to the person you need to administer it,” Ms. D’Angelo said.

Davis Janowski can be reached at [email protected].