Merrill Streamlines Their Platform To Deliver UMH for Clients

Last week, I was contacted by a reporter from FundFire looking for my comments on a new feature that Merrill Lynch has implemented as part of their $100 million platform consolidation project.  The project, called Merrill One, is replacing five other legacy programs, some of which have been running for over 25 years.  She was interested in my opinion as to whether the rest of the industry is also moving in this direction and what progress they have made so far. FundFire logo

The new platform is designed to deliver a streamlined experience to Merrill’s 1.4 million clients in managed account programs.  It includes a single set of documents, no matter how many different types of accounts or products the client has as well as a unified fee structure.  If all of this is delivered, it will keep Merrill on the cutting edge of investment advisory technology.

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IAS Responds: Which Portfolio Rebalancing Software is Right for You?

As part of my series of articles on portfolio rebalancing software, I met with some folks from Interactive Advisory Software (IAS), who were kind enough to give me a demo of not only their rebalancing tools, but their entire wealth management platform, called Solution 360.

IAS is based in Egg Harbor Township, NJ and was founded in 2000.  They have 55 employees to support around 200 firms using their platform, of which 90% are RIA’s.  They are a fully-owned subsidiary of Hanlon Investment Management, which purchased IAS from their VC backers in 2012.

I had the pleasure of speaking with Nathan Burke, CEO of IAS and Matt Wolf, Regional Sales Director who provided a high level overview of their product.  They handed me off to Wade Waller, Director of Product Management and Ryan Jotkoff, the Product Manager for Rebalancing to answer my more in-depth questions.

Tax Management Sets IAS Apart from the Competition

Tax management is probably the area that most sets them apart from their competitors, according to Wolf.  Since their platform includes financial planning and their rebalancer is tightly integrated with the rest of their system, it has immediate access to a lot of additional client information.  This helps the rebalancer make better decisions as well as generate detailed tax estimates with multi-year projections and taking into account gross income, itemized deductions and client expenses, he explained.Tax Squeeze Finger

While I usually advise clients against ‘re-inventing the wheel’, in this case, the time and effort it took IAS to develop their own financial planning functionality has paid off.  Whereas other firms force clients to import data manually or use programming interfaces that are sometimes unreliable, IAS has immediate access to all the data.

And they use this data to their full advantage across the system in ways I haven’t seen many other vendors offer.  The system has an automatic exercise feature that converts employee stock options into an underlying equity position going forwards, captures dividends and can even project the client’s future tax rate, Wolf added.

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FolioDynamix Making Waves in Bank Trust Market

Fundfire featured an article yesterday about FolioDynamix adding a new client in the bank trust space.  They called me for comments on how the company has positioned themselves to increase bank trust market share and if their platform provides an opportunity for asset managers to sell more product.

The article is by Danielle Verbrigghe, who recently replaced Tom Stabile as the wealth management reporter for Fundfire.  I always enjoyed reading Tom’s work, talking to him at conferences and was glad to be able to contribute to a number of his pieces.  I wish him the best of luck on his new beat, alternative investments.

But wait, there’s more!

Going Under the Hood of Models-Only Programs

This is a summary of a session from the Money Management Institute’s Fall Solutions Conference that was held in October 2013 in New York City.

Moderator: Heeren Pathak, CTO, Vestmark

Panelists:

Are some asset classes better suited for use in models-only programs?

Asset classes that are more liquid are usually easier to trade in a model, Lasker observed.  Communication is important here since some assets can become illiquid for short periods of time and the managers need to know when there are problems implementing model changes, he stated.

While some strategies are more challenging, most obstacles can be overcome so that they can be included in a model, Overway commented.  Fixed income is a good example, since the models are often provided in the from of a list of characteristics instead of individual securities.  This entails more communication between the Natixis overlay management group and the model manager about which securities would be acceptable in the model portfolio, he pointed out. Continue reading

6 Keys to Launching a Successful UMA Program

This is a summary of a session from the FRA’s 11th Annual Managed Account and UMA Summit that was held in September 2013 in NYC.

Moderator: Bill McFadden, U.S. Business Development, CGI

Panelists:
Chris Gibbons, VP Investment Product Management, PNC Asset Management
John McDevitt, CFA, SVP, Brown Brothers Harriman
Sophie Schmitt, Senior Analyst, Wealth Management, Aite Group

1. Centralize investment management processes before launching a UMA.

Schmitt explained that it would be easier for firms to launch a UMA if their investment management was centralized, since the advisors would already be used to outsourcing these decisions.  Advisors are creatures of habit and prefer to sell products with which they are already comfortable, she said.

Brown Brothers made that decision a few years ago and it was a struggle, McDevitt reported.  One important factor was communicating to their advisors that it was better for their clients to have a dedicated asset allocation team that could provide proprietary investment products along with third party mutual funds, he said.

According to Gibbons, PNC rolled out their UMA solution in late 2010 and they are now closing in on $4 billion in AUM.  While much of their growth was mandate-driven (the stick), it was easier because they already had a centralized investment management and asset allocation infrastructure in place. Continue reading

Why Haven’t Advisors Embraced Unified Managed Accounts?

This is an overview of a session from the MMI 2012 Tech & Ops Conference held in Jersey City, NJ.

Moderator:

  • Jay Link, Managing Director, Managed Solutions Group, Merrill Lynch

Panelists:

  • Andrew Clipper, Managing Director, Head of Wealth Management Services, NA, Citi
  • John Capelli, Managing Director, COO, Managed Account Advisors, Merrill Lynch
  • Rob Klapprodt, President and Co-Founder, Vestmark

Are UMA/UMH and Rep as PM essentially the same thing?

While there are similarities between the Merrill UMA and Rep as PM programs as far as the end investor is concerned there are important differences, Capelli emphasized. UMA’s can include investment management delivered strategies, for example. Also, while Rep as PM can use mutual funds and ETFs to provide exposure to lower correlation asset classes, such as emerging markets, a UMA can deliver them at a lower cost using individual securities, he said.

If the goal is to create a portfolio across all of an investor’s assets, those assets are usually spread out across numerous legal entities and accounts, Clipper observed. The UMA/UMH structure is the best delivery mechanism for a holistic approach. On the OpenWealth platform, they separate out portfolio administration (i.e. rebalancing, asset location, cash management) from the intellectual property (i.e. the models). The portfolio administration is all handled in a central location, while the intellectual property can be added anywhere along the value chain, he said.

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Finding the Keys into Sponsor Platforms (2/2)

This is a summary of a session from the Money Management Institute’s 2012 Fall Solution Conference. This is part two of a two-part series.  You can read part one here.

Moderator: 
Panelists:

What is the makeup of your analyst team?

Raimer’s due diligence team is comprised of six people, all with very different backgrounds.  Some are CFAs, some are MBAs, there’s a former wholesaler, a former relationship manager, and a former product manager.  They play off each other’s strengths and also do a lot of cross training, he said.

Managing a portfolio manager’s time is always a challenge, Raimer observed.  If an analyst insists on meeting with the portfolio manager, Raimer first tries to deflect, by reminding them that they would rather the portfolio managers spend their time researching future trades.  Everyone on the team can deliver the introductory discussion around every investment strategy that they offer and this takes some of the workload off the portfolio managers.  They also have portfolio specialists and product managers and try to do everything they can to only take the PMs away from their desk when they really need to, he insisted.