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!

Advice for Going Global with Managed Accounts

As the world has become flatter due to the effects of globalization, investors have felt pressure to diversify beyond their domestic markets.  Most financial firms met this demand by offering assets registered in multiple jurisdictions, however, this was usually only for non-discretionary programs.

Sponsors have recently been adding global capabilities to their managed account products as well such as multi-currency, F/X hedging and trading in foreign ordinaries.  Along with these expanded offerings comes additional layers of complexity.

This article is a summary of a panel session from the Money Management Institute’s Fall Solutions Conference that was held in October 2013 in New York City. The discussion covered the benefits and challenges of expanding managed account programs to meet the needs of global investors. It also covered some of the latest developments in the highly specialized marketplace for Depository Receipts (DR’s), American Depository Receipts (ADR’s) and Global Depository Receipts (GDR’s) and the impact of fungible trading on the managed accounts space. Continue reading

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


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

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

Lincoln Financial Broadens Program Appeal, Advisor Choice With New UMA Program

A though-provoking and well-researched article about a new UMA program launched by Lincoln Financial was just published today on GateKeeperIQ.  GatekeeperIQ is a comprehensive resource covering the people and processes that drive decision-making on large retail investment platforms.  The article, written by Managing Editor Hannah Glover, has some interesting details about the new UMA program:

Lincoln Financial has rolled out a model-only unified managed account (UMA) that offers a lower investment minimum than an existing separately managed account program and provides advisors with greater flexibility and investment product choice, according to a December 20 regulatory filing.

The new Multiple Manager Strategy Portfolio, which is run by Boca Raton-based turnkey provider Independent Portfolio Consultants and offered through Lincoln’s Managed Assets Program (LMAP), also has lower overall client fees for equity and balanced accounts, compared to the SMA version, regulatory filings show.

Dropping minimums and making it easier to diversify assets within a single account could spur growth in the program at a time when distributors seek to grow their fee-based businesses, says Craig Iskowitz, managing director of Ezra Group, a wealth management technology consulting firm in East Brunswick, N.J. “Everyone is looking to attract more high-net-worth clients,” he says. “Lowering fees and lowering minimums are great tools to expand the attractiveness of these programs to advisors.”

Continue reading

High Growth Solutions for Models Only Programs

This post is a summary of a panel from the MMI Tech & Ops Conference.

Hereen Pathak, CTO, Vestmark

Tom Huddleston – SVP, Natixis Asset Management.
Elba Cruz – Director of Overlay Portfolio Management, Morgan Stanley Smith Barney
Andrew Rose – VP, Redi2 Technologies
Josh Mayer – EVP, Managing Director Operations, EnvestNet.

13F/13G Reporting – under what conditions do you do the reporting versus requiring the model provider to do it?

As an overlay manager, Natixis is both a model receiver and model provider, Huddleston explained.  They approach the reporting requirement by asking “who’s got discretion” for trading the models.  In most cases, the model receiver has discretion, so they are responsible for 13F/13G reporting.  Another reason is because it would be difficult for a model provider to have insight into how the model is being applied, he said.

Cruz disagreed and said that it is the model provider who has discretion.  From a regulatory standpoint, it is up to the model provider to deliver the necessary information required for 13F/13G reporting.  It is important for the model receiver to provide the information back to the model provider including details about how the model is being implemented, he said.

Mayer countered that it depends on the manager’s relationship with the program.  The manager may have discretion based on prior agreements. In EnvestNet’s
program, model managers assign discretion to the firm. In a UMA world, there can be dual-discretion between the overlay manager and SMA sleeve
manager, since both may have some trading authority, he explained.

Frequently Asked Questions About Form 13F, Form SH, Schedule 13D & Schedule 13G

Continue reading

RIAs Take Advantage of Discretion to Launch UMAs and Improve Efficiency

This is a summary from a session of the MMI Tech and Ops Conference with a panel made up of Registered Investment Advisors (RIAs).  The discussions centered around the use of Unified Managed Accounts (UMAs) and the advantages of discretionary versus non-discretionary accounts.


Roger Paradiso, Director/CIO, Managing Director, Morgan Stanley Smith Barney


Dan Sherman, SVP, Family Wealth Director, Morgan Stanley Smith Barney.  Dec 1990, Sherman Group.  They manage over $1 bil in house and advise $2 bil out of house with a seven person team, using a top down method and proprietary financial planning process.

Mark Rogozinski, President, Rockit Solutions, LLC.  They are a back office solution for single and multi-family offices and trust companies.  They are a wholly-owned subsidiary of Rockefeller Financial with around $30 bil in AUM.  Mark has been at RockIt for two years.

Tim Flynn, RIA, President, Tim Flynn LLC.  Currently transitioning from traditional, corporate RIA to a hybrid RIA.  Boutique shop in NYC.  5 people, 3 registered reps and 2 support.  Currently managing $425 mm AUM internally, and $350 mm away, consulting primarily to retirement plans.

Are you using UMA programs and if so, what features do you think are the most useful to your clients?

Rogozinski theorized that all the advantages of UMAs evaporated during the financial crisis, specifically around overlay management and tax efficiency.  Their clients started getting out of UMAs and back into SMAs since there were no longer any embedded gains, which would prohibit them from moving.  Another factor was new technology that Rockit introduced that allows their clients to become their own overlay managers.

In the RIA space, Rockit implemented a new UMA strategy, which is very cost effective and tax efficient, Rogozinski reported.  The new system allows them to service smaller clients at lower thresholds and offer more separate account managers on their platform.  Many firms sold all their UMA assets and switched to mutual funds, since there were no embedded gains after the market crisis.  It’s a very cyclical business and five years from now will probably return to UMAs when the market goes back up and creates new embedded gains, he projected.

Flynn built his practice with open architecture and non-discretionary accounts.   Then he realized that it was expensive and didn’t scale very well.  About 18 months ago, he began to shift his focus to UMAs through two platforms available from his broker-dealer.  UMAs allow him to deploy assets differently, he can run more assets with a smaller staff footprint.  These products have enabled him to become more competitive.

Dan Sherman has seven people on his team at Morgan Stanley, four of whom are partners.   They use a top down financial planning perspective that eventually ends up with an asset management end product.  According to Sherman, they have shifted the bulk of their capital appreciation assets onto their UMA platform.  These assets include more than just equity, but not traditional fixed income.  On the fixed income side, they run a traditional transaction-based business, he said.

Continue reading

Diversify, Diversify, Diversify – 3 Ways to Help Advisory Products Succeed in Volatile Markets

“How can clients improve diversification in their portfolios?” was the question Roger Paradiso posed to those attending this session at the MMI Tech and Ops Conference 2011.  Client’s portfolios aren’t performing as expected and their needs aren’t being met, he said, they are looking for solutions. The recent rise in volatility in the market, he explained, combined with the correlation of many previously uncorrelated asset classes, has increased the priority of diversification for many investors.


Roger Paradiso, President and Chief Investment Officer, Private Portfolio Group, Morgan Stanley Smith Barney


Mark Thomas, Senior VP, Head of Managed Accounts, PIMCO
Joe Mrak, CEO, FolioDynamix
Donna Davis, Director of Trade Management, Private Portfolio Group, Morgan Stanley Smith Barney

Alternative investments help to diversify portfolios. How are you introducing alternatives into advisory solutions?

PIMCO uses a forward-looking process when designing client solutions, Mark explained. They evaluate what vehicle, product or platform makes sense and decide on the right structure for each client. Support for 40Act funds, limited partnerships, private funds, and separate accounts are all included in their program.

One issue when introducing new products is ensuring that there is enough capacity, Mark said. PIMCO is continually looking for ways to lower the minimums in their alternative structures and vehicles to make them available to a wider audience.

Continue reading

A Manager’s Guide to Breaking into Sponsor Platforms

“Uncovering Managers in Today’s Crowded Market: Accessing the Platform” was one of the sessions from the MMI 2011 Fall Solutions Conference.  This post is a summary of that session.


  • Thomas Latta – Global Head of Traditional Due Diligence, Bank of America Merrill Lynch, leading the traditional asset class due diligence teams (35-40 people), both domestic and international, also serves the entire organization including US Trust, his team provides advice and guidance around the implementation of managers. This doesn’t include portfolio construction.
  • Barnaby Grist – Head of Wealth Management at Cetera Financial Group. Formed 18 months ago after three broker dealers from ING merged. Responsible for support of all advisor platform needs. Formerly with Charles Schwab.
  • Greg Nordmeyer – VP and General Manager, Managed Accounts, Ameriprise Financial. $100 bil in AUM in managed accounts. Has P&L responsibility for product management, product development and research teams.

How do you formalize your expectations with managers?

In order to set expectations and improve communications, Ameriprise created a guide for managers coming into their firm, Nordmeyer explained. However, since every relationship is different, each manager can’t be handled in exactly the same way. They are all unique relationship, from large, established asset managers down to very small boutique firms.

The manager’s guide does help explain how to work with Ameriprise’s platform and includes general information about operations, sales and marketing, points of contacts, as well as answers to specific questions such as “how do the quarterly fact sheets work?”. They update it and distribute it annually, Nordmeyer said.

Latta added that Merrill Lynch has wealth management specialists in the field and their job is to identify needs for particular resources and then communicate them back to the Due Diligence Team.

Continue reading

Are Managed Accounts Obsolete?

This post is a summary from a session at the Financial Research Associates 9th Annual Managed Accounts Summit in Boston, MA.

These are three of the most frequently asked questions regarding the managed solutions industry according to David Gardner, Principal, Smart Consulting Firm, LLC.

Are managed accounts obsolete?

David informed us that managed solutions today are far from dead and are, in fact, alive and well. But we shouldn’t lump all advisory solutions together, he warned. As reported by Dover Research in the most recent edition of MMI Central (see the table below), Managed solutions reached $2.3 trillion in total AUM as of 2Q 2011. This was a 3.1% increase from 1Q 2011 and a 31.8% increase from 4Q 2010.

Clients are no longer seeking products, but solutions, David advised. They want greater rationalization, efficiencies of holding disparate assets, styles and strategies on a single platform.

Will the UMA kill off the SMA?

SMAs are far from dead, David continued. Third party, actively managed investment strategies provided by professional managers in fee-based accounts are still a viable part of our industry, he insisted.

Third party managed accounts for both sponsors and investment managers had trouble achieving operational scale when they maintained duplicate infrastructures that lacked standardization, according to David. The advent of UMA model portfolio programs provided efficiencies in areas such as investor profiles, account maintenance, custody, and trade execution, which helped firms deal with operating margins that have been declining over the past two decades, he said.

As of 2Q 2011, the SMA market showed a respectable growth rate, relative to the broader equity markets, growing by 2%, with $6 billion in net new flows, which is a positive indicator given the current market environment, David acknowledged.

From 2008 AUM until 2Q 2011 assets have grown steadily in SMA Advisory. During this period, as reported by Dover Research, SMA assets grew from $476 billion to $596 billion, which is a 25% increase. The growth of SMA assets has been in a steady decline since their peak in 2003. UMA market segment grew the fastest (7.7%) of all segments in the last quarter. It was largely attributable to newly launched programs, David said. SMAs aren’t going away, he assured us, they just have found a new home. They’re relocating onto UMA platforms with a lot of new friends living in the sleeves next door such as ETF, mutual funds, fixed income, multi-currency and alternatives.

It’s not SMAs vs UMAs, David argued, since SMAs have always been an available component of a UMA.

Are UMA model portfolios just a way to marginalize manager intellectual capital and compress their fees?

David’s point of view is that managers shouldn’t look at model portfolios in a negative light, they should look at them as a way to unburden themselves from maintaining a duplicate client account infrastructure. Model portfolios, he added, allow managers to do what they do best, which is managing money.

David pointed out that this is an age-old efficiency question with SMAs. As a manager, would you rather compete for a piece of a slower growth pie of SMA Advisory, and accept ever declining margins, or focus on the UMA model portfolio market, which is growing exponentially, although with lower, yet very stable fees, but with less overhead cost?

DTCC projects that the number of models being distributed will grow from 1,100 today to over 13,000 by 2015, David reported.  They also project in the same timeframe that half of SMA assets will convert over to UMA platforms.  They’re seeing announcements every day as more sponsors commit to wholesale conversions of their existing SMA relationships into UMA model portfolios, David confirmed.

David summarized by saying that UMA model portfolios allow managers infinite scale and efficiency to deliver not only their intellectual capital but also new products with increased profit margins and increased operational efficiencies.