Bank of America Corp. introduced a unified managed account platform Wednesday as it looks to go head-to-head with Bank of New York Co. and the wire houses in an evolving market.
Analysts say the Charlotte banking company must play some catch-up since Bank of New York's Lockwood Advisors has been offering such a platform for nearly three years.
Dan McNamara, the managing director of Bank of America's consulting services group, said he expects in the next 12 months that the unified managed account platform will be, "on a percentage basis, the fastest-growing solution that we offer" to affluent clients.
"Within our organization this will be the primary way we deliver advice and solutions to our clients," Mr. McNamara said. "We can't stop this. The UMA is driven by clients. They want a product that makes it easier, and that is what the UMA is all about."
Bank of America's unified managed account platform, Portfolio Strategies-Managed, offers more than 70 portfolios, with investment minimums starting at $250,000. It will initially be available through the bank's brokerage unit, but Mr. McNamara said it will be available to private banking customers by next year.
Bank of America has twice delayed the start-up of its unified managed account, and last December Mr. McNamara said he expected to launch the platform in the first half of this year. The product was delayed, he said, because the bank wanted Parametric Portfolio Associates, a Seattle overlay manager it hired to provide overlay tax management for the platform, to be more flexible.
"We are a lot different from other organizations that are offering a unified managed account platform because their primary distribution is their broker-dealer," Mr. McNamara said. "We have distribution segments that span very different client segments, and we wanted to develop a platform that serves both business models. So that took a little longer for us to develop."
Analysts said banks are intrigued by the concept of unified managed accounts but that adoption has been slow. Eleven percent of banks surveyed from May through August by Dover Financial Research, a Boston consulting firm, have said they are offering unified managed accounts and 67% were developing or planned to develop a platform within 12 months.
Large banks have spent recent years developing their own unified managed account platforms, and smaller banks have turned to third-party providers. In 2002, Bank of New York bought Lockwood Advisors Inc., which specialized in separately managed accounts and launched a unified managed account platform in 2004.
Like Bank of America's platform, Lockwood's is available to investors with at least $250,000 to invest. Lockwood's average unified managed account has $400,000 of assets. Mr. McNamara said he expects Bank of America's average unified managed account will have $500,000 of assets.
Analysts said Lockwood is regarded as the unified managed account leader, with $760 million of its $23 billion of assets under management in unified managed accounts.
Mr. McNamara said Bank of America's consulting services group has developed fee-based products quickly. It introduced its first fee-based product five years ago and already offers mutual fund wrap accounts, separately managed accounts, and a multidisciplinary account. It administered $30 billion of assets in fee-based products at Sept. 30.
Lockwood, a unit of Bank of New York's Pershing Group Inc., is now creating unified managed account platforms for other financial institutions. It introduced a unified managed account platform two and a half years ago that included only Lockwood products.
The Malvern, Pa., firm also is launching a unified managed account that offers the tools for companies to build their own platforms, said Leonard Reinhart, Lockwood's chairman and chief executive officer.
He said the unit only really began promoting and marketing its unified managed account platform this summer. Since putting a sales effort behind the product, he said, assets have flowed in quickly.
"We are really getting behind this product now," Mr. Reinhart said, "and we expect sales and assets will really accelerate. We have big expectations for growth in the next year. We are getting a lot of money coming into this now."
Rus Prince, a high-net-worth analyst at the Prince & Associates consulting firm in Shelton, Conn., said that, conceptually, unified managed accounts are a good product. But in order to accumulate assets in it, he said, banks must hire the right people to "explain it and motivate people to use it."
"In essence, it is really the classic private banking model recreated with higher technology and open architecture," he said. " ... This product is really a renaissance rather than an innovation."
Mr. Reinhart said the product is still evolving. "This is a complicated process," he said. "We are attempting to mix and match products that grew up in different silos. We are working to break down those silos and create unconflicted pricing. A lot of things have to be reinvented in order to really do this right. This is a far more complex process than anything we have done in managed money before."
Mr. McNamara agreed that the product is evolving, but he said it is crucial for banks to offer an open architecture solution if they want to compete for assets.
"Banks are never going to get into a fee-based environment if they can't philosophically change their approach to investing," he said. "If you look at the banks that are struggling, they are the institutions that are married to their proprietary products. We made the decision five years ago as a firm that we had to bring the best solutions regardless where they are from. ... We have to find managers that can complement our internal strengths, and that approach gives you credibility."
