OVERVIEW

UMAs

Unified Managed Accounts (UMAs) - a natural evolution of the separately managed account (SMA) industry are now being used extensively by wirehouses, banks, regional broker/dealers and turnkey asset management providers as part of their fast-growing fee-based investment and financial planning offerings. More than a product, a UMA is a chassis that simplifies the traditional SMA experience by giving investors exposure to multiple managers, styles and investment vehicles within a single account.

Most contemporary UMA programs have expanded beyond SMAs to utilize other investment vehicles such as open-end mutual funds and ETFs. UMA platforms can take on a variety of forms, reflecting the goals and characteristics of the sponsoring institution. Portfolio tax management, manager choice, asset allocation flexibility, and performance reporting are a few of the important variables.

Traditional SMA Structure

Overlay portfolio managment is central to UMA design and implementation. A UMA overlay manager is responsible for the coordination and implementation of the account. The Overlay manager's role can extend from initial trading to rebalancing, restrictions, cash flows, and, where relevant, the consideration of portfolio tax liabilities. Historically, portfolio customization and tax management have been central tenets in the case for SMA's. In reality, very few SMAs are customized or tax-managed since traditional SMA managers focus on managing account dispersion and producing pre-tax performance.

One of the most exciting trends in the financial services industry, UMAs are estimated to grow to 50% of SMA assets by 2010 according to the Money Management Institute (MMI). In addition to providing a platform where customization and tax management can readily occur, UMA's materially reduce the administrative burden of advisor and client. Additionally, relative to traditional SMA programs, most UMA platforms offer significantly better style and manager diversification at smaller portfolio sizes.

UMA Structure with Overlay Manager