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by Rich Marulanda

DTCC recently joined hundreds of technology, operations, sales and marketing professionals to discuss current trends affecting the managed accounts industry at the 9th Annual Managed Accounts Summit held in Boston.

Headlining the agenda for this year’s summit was a new breed of managed accounts known as UMAs, or model portfolios, which are one of the fastest growing segments of the managed accounts industry, according to industry research. UMA/model portfolios merge multiple product types, such as separately managed accounts (SMAs) and mutual funds, into a single client account that sponsors (broker/dealers) usually customize for their clients for tax optimization and investment preferences.

The two-day event, organized by Financial Research Associates (FRA), set the stage for an ongoing dialogue among top-level executives who are navigating the changing managed accounts landscape. While the summit provided a venue for the industry to examine the short- and long-term impact of these non-traditional managed accounts, it also gave participants an opportunity to gain a better understanding of the trends, projections and opportunities that exist in this market segment.

Several members of DTCC’s Wealth Management Services Product Management team led panel discussions on topics that included identifying and managing risk in the UMA/model portfolio industry, and developing and adopting data standards.

A topic for the next decade

“In just the last few years, cutting-edge wealth managers have embraced the use of third-party investment models as the key to efficiency and scale – and now the industry is taking notice,” said David Gardner, DTCC external project director and strategic partner, Wealth Management Services, who served as conference co-chair. “In fact, about 90% of the people in the industry are either moving toward UMA management or budgeting toward developing a UMA solution sometime in the next three years.”

So why the shift now? After experiencing the turbulence in the financial markets in recent years, investors are searching for more comprehensive advisory solutions that generate income and provide principal protection, explained Gardner.

“Investors are migrating away from product-specific investments toward comprehensive multi-product solutions, such as UMAs,” he said. “It’s the first major change in the last three decades and it’s transforming the way investment advice is delivered, and it’s going to be the topic for the next decade.”

Model management

To address this changing landscape, DTCC has been enhancing the technology of its Managed Accounts Service to support new market developments just like this. In the coming months, DTCC’s model management exchange solution will have finished pilot testing and become fully available, centralizing, standardizing and facilitating the model distribution process between investment managers, overlay portfolio managers and model program sponsors.

“While operational efficiency is paramount to the continued growth of the UMA market, the ultimate success of this segment will be measured by the industry’s willingness to rally together to address the operational, regulatory and business challenges that result from rapid growth,” said Ann Bergin, DTCC managing director and general manager, Wealth Management Services.@