May 16, 2024
Managed Account Programs Continue to Thrive: Are You in the Game?
By Vestmark Inc., Resources
The managed account industry has regained its momentum after a pullback in 2022, with Cerulli reporting robust growth of 13% in 2023, ending above the $11 trillion mark. With sponsor firms focused on program consolidation and separately managed accounts continuing to grow in popularity, the strong growth is expected to continue, with assets reaching $15.6 trillion in 2026.1
According to Cerulli, managed account assets continued to diversify away from the wirehouse channel, with independent broker dealers and TAMPs adding market share. Notably, Fidelity and Edward Jones continued to be significant players in this landscape, growing market share by 3.1% and 2.9%, respectively, over the past decade.
Why the Continued Momentum Towards Managed Accounts?
The appeal of managed account programs persists for both clients and advisory businesses due to several key factors. Clients benefit from advanced customization, transparency, and controlled fees offered by managed accounts. For advisors, these accounts provide a reliable revenue stream through asset-based fees while allowing them to access lower-cost investment products, thereby maintaining margins and profitability.
Growth Drivers in the Industry
Rep-as-Portfolio Manager (Rep-as-PM) and Unified Managed Account (UMA) programs remain a significant driver of growth. According to the Money Management Institute (MMI), wealth managers have been encouraging their advisors to outsource portfolio management to a home-office or third-party solution for well over a decade. But many advisors are reluctant to do so, preferring the control of Rep-as-PM programs. As a result, sponsor firms are trying to provide advisors with tools and resources to help them become better portfolio managers.2
UMA programs continue to gain popularity, offering a comprehensive solution that combines multiple investment types in a single account. Home offices, in particular, are attracted to the compliance and oversight benefits of UMAs.
Cerulli believes that UMA programs are at the forefront of many of the key trends in the industry. “The efficiency offered by the ability to combine multiple vehicles in one account registration allows for easier holistic financial planning and coordination, and the implementation of overlay services can lead to better tax planning and more efficient tax outcomes. As personalization and customization become more important to advisors and their clients, UMA adoption only stands to increase and accelerate.” 1
Getting Ahead in the Managed Accounts Space
As margin compression and regulatory pressures persist, many firms are expected to pivot towards fee-based accounts, emphasizing managed account programs for their steady and predictable revenue streams. The transition to managed accounts necessitates well-designed programs supported by robust technology. This combination enables firms to serve a larger client base, increase assets under management per advisor, and enhance advisor productivity. For those looking to capitalize on this trend, leveraging innovative technology and services is paramount.
At Vestmark, we've been at the forefront of assisting top sponsors in rolling out their managed account programs, leveraging our innovative platform and services. If you're looking to navigate the managed accounts landscape successfully, we're here to help you seize the opportunities it presents.
1. Cerulli U.S. Managed Accounts 2023: Decisions About Discretion. January 2024.
2. Money Management Institute & Cerulli Associates Advisory Solutions Quarterly, 4Q 2023.
