Find out how to strike the right balance between client wants and industry needs. Watch the first or our three-part video series “Maximizing the Power of UMAs.”
Balancing Standardization & Customization
Where traditional UMAs fall down:
The power of UMAs comes from their ability to offer clients a comprehensive overview of their investments while streamlining operations and cost for firms, advisors and trust officers. Yet many UMA solutions struggle to strike the right balance between customization that satisfies clients and standardization that satisfies the bottom line.
Clients require a baseline of customization in order to minimize taxes and find other efficiencies. In these cases, rebalancing to an exact model may not be appropriate. At the same time, a UMA structure needs to support “below the line” investments and accommodate different levels of discretion and working relationships between client and advisor.
This demand for customization extends to reporting as well. Clients want reporting that shows asset allocation and sources of return in a format they’ve come to expect, even if the firm needs to classify an asset – such as a real estate investment trust – differently within their systems. Inflexible UMA solutions require every advisor and investor using the UMA to categorize investment vehicles the same way. It forces advisors to take a backseat to technology providers and managers in serving their own clients.
For banks and trusts, a UMA solution must increase profitability through minimized trading costs in transactions and fees. Trading operations must support restricted positions as well as income positions.
Ultimately, firms must have flexibility to classify investments in multiple ways to meet the needs of the client and their own internal systems in order to create consistent representations for trade analysis, holding reports and performance management.
Where InvestEdge’s UMA stands up:
InvestEge UMA puts control back in the hands of the firm by allowing the organization to assign specific asset classifications based on the firm’s approach and clients’ collective preferences. All investment vehicles, including model-based manager strategies, in-house investment solutions, mutual funds, ETFs and non-marketable assets can be combined within a single account and are treated as first-tier products. Product designations are tracked at both the holding and transaction level. This structure provides firms with significant efficiencies via centralized trading tools for accounts tracking a model while automatically supporting the need to exclude income cash positions and restricted positions.
The UMA solution is sensitive to trading costs – buys and sales in the same portfolio are netted, and the tax lot selection is completed a the portfolio level, regardless of the investment strategy behind the sale. The solution supports pre-trade compliance alerts, giving advisors the ability to manage sensitive accounts independently form the centralized trading team.
InvestEdge’s solution makes it easy for advisors to put client priorities first and justify their fees as a true financial partner while utilizing a standardized approach at the enterprise level.
