Unified managed accounts have remained more resilient than other products while markets have suffered, the Money Management Institute said.
Third-quarter assets in the accounts rose 1.5% from a year earlier, to $40.2 billion, the institute said Wednesday.
Hillary Fiorella, an external affairs adviser for the trade group, which tracks managed and unified managed accounts, said the main reason unified accounts have been able to add assets is their diversity.
Her institute defines UMAs as accounts that house multiple investment products, including separately managed accounts, mutual funds, and exchange-traded funds.
The unified account remains in its infancy, Ms. Fiorella said, but it is gaining traction among advisers, because it is easy for advisers to sell to a wide array of customers.
Unlike separately managed accounts, which normally require a minimum investment of $200,000, an adviser can create a diversified UMA with mutual funds and exchange-traded funds for a minimum investment of $10,000 to $25,000.
Since unified accounts are relatively new, and some companies, unlike the institute, count separately managed accounts or certain types of mutual funds as UMAs, collecting data about them can be difficult, she said.
Some large banking companies, including Bank of America Corp., which launched its platform two years ago, are not among the institute's top UMA providers yet, according to Ms. Fiorella.
However, B of A's acquisition of Merrill Lynch & Co. Inc., which had a platform of its own, could put the Charlotte company on that list, she said.
The accounts had a strong third quarter, even though the managed account solutions industry, which includes unified and separately managed accounts, was hampered during the quarter by difficult equity market conditions.
During the quarter it lost $158 billion, or 9.3% of its assets — slightly below market returns. Before the third quarter, the industry's returns had consistently beaten the Standard & Poor's 500, the institute said.
For the first time since it began collecting data on the industry in 2000, all major segments of the industry suffered losses in the third quarter, the institute said.
The Boston research firm Cerulli Associates said it is understandable that most firms with unified account programs have been tightening the constraints to provide more oversight until advisers become comfortable with the platform.
However, independent broker-dealers and third-party vendors will need to loosen these constraints and provide a more balanced selection of investment vehicles, including UMAs, to achieve higher sales, Cerulli said. This could be done by letting financial advisers integrate prefabricated investment platforms, such as UMAs, into customized client portfolios, the firm said.
Loosening the constraints would give independent broker-dealers the freedom and flexibility to run their own investment programs — a desire that almost certainly drove them to the independent channel in the first place, Cerulli said.
Rus Prince, the president of the Redding, Conn., consulting firm Prince & Associates Inc., said he expects wealthy investors to pull back next year, even if the markets recover, and that could be bad news for all investment products, including unified accounts.
"Many of them have been burned and will be hesitant," he said.
Financial services firms will continue to offer UMAs, since they remain profitable products and generally appealing to clients, Mr. Prince said, but there will likely be pressure to lower fees to remain competitive next year.
James Tracy, an executive vice president and director of business development for Citigroup Global Wealth Management, said UMAs overall are doing well at his division.
It has $35.8 billion in its platforms, but it would not provide any growth figures.
Clients like the broader asset allocation and diversity in product classes that UMAs offer, he said. In addition, the combination of active management and exchange-traded funds gives clients protection from performance swings.
Marc Brookman, director of product development for the division, said it began noticing in the third quarter that advisers were working to reposition portfolios, and many have gotten defensive and moved assets to cash.
As the end of the year approaches, advisers are looking at unified accounts from a tax perspective and wondering if it is time to put their assets into different products, he said.
Mr. Tracy said he does not necessarily think wealthy investors will be cautious next year.
"You can't change what has happened in '08," he said. "But it doesn't interfere or shouldn't impact recommendations on what is the appropriate thing to do from a longer-term perspective."
On a long-term basis, the market will show why it is smart to invest in a balanced portfolio, Mr. Tracy said; cash looks safe but does not provide the growth clients want.
Mr. Brookman said new clients are still coming into the advisory group at Citi's Smith Barney at a pretty good rate. In the first 10 months of this year the group's new business rose from the same period last year, he said.
Mr. Tracy said he does not necessarily think that there will be fee pressure for UMAs next year.
"Where we have UMA prices is already incredibly good," he said. "I don't think clients will ask you to discount value just because the market is in decline."
