Though banks continue to gain momentum with managed account sales, most lag in selling the more sophisticated unified managed accounts that link a collection of investment products on one platform, according to executives in Franklin Templeton's private-client group.
"The unified managed account is a product whose time has come, but it is very difficult for banks, with their other investment products built in silos, to get all of their products to work under one unified managed account wrapper," said Bill Deakyne, a vice president and director of product management at the San Mateo, Calif., unit of Franklin Resources Inc.
Mr. Deakyne said he believes unified managed accounts can be a strong platform because of their ability to link managed accounts with existing investments in mutual funds, exchange traded funds, and other products.
Mark R. Meyer, an executive vice president and national director of sales and business development at Franklin Templeton, said the company has put its managed account product on several unified managed account platforms and is in talks to join others. The industry will encounter growing pains in the transition to unified managed accounts, he said.
"It is difficult for all of these pieces to work in one platform," Mr. Meyer said. "It is very challenging to get manager A to work with manager B even when you are all working for the same company."
Banking companies have been working for two years to develop unified managed accounts. Executives at the handful of banks that offer the product have said they see an opportunity to develop wallet share.
Companies like Wachovia Corp., Citigroup Inc., and AmSouth Bancorp and bank affiliates like KeyCorp's McDonald Financial and PNC Financial Services' PFPC Worldwide Inc. have all launched unified managed account platforms. Most recently, Royal Bank of Canada's RBC Dain Rauscher started a platform last month.
Wachovia's Diversified Managed Allocations was started in December 2002 and by Aug. 31, 2003, had accumulated $500 million of managed assets. By this July 31, $2.57 billion of assets were under management on the platform.
"Banks like Wachovia have already proven that this is a program that they can generate assets with," said Burton Greenwald, a Philadelphia analyst. "Some banks may take more time than others, but this is a platform that will succeed over time."
Mr. Deakyne said banking companies must learn how to walk before they can run. "Banks are still a little more silo'ed than the wire houses," he said. "They are still learning. They are still converting clients and finding prospects. They are learning managed accounts before the dive into unified managed accounts."
Managed accounts themselves remain a relatively new product at banks. Wachovia introduced the first bank managed account in 1998. Franklin Templeton's private-client group only began offering managed accounts five years ago.
The California company oversees $5.5 billion of managed account assets, including $600 million in the bank channel. It has developed subadvisory partnerships with Wachovia and Wells Fargo & Co. It also has a partnership with Lockwood Advisors, Bank of New York Co.'s managed account unit, to supply the product to small and midsize banks. And it is in discussions with J.P. Morgan Chase & Co. about a partnership agreement, Mr. Meyer said.
He said he expects 20% to 25% annual growth in Franklin Templeton's managed account assets during the next five to 10 years and 50% to 75% annual growth in its bank channel during the same period.
Banks are excited about managed accounts because they offer another way to reach out to high-net-worth customers, Mr. Meyer said. The Money Management Institute has reported that banks increased their share of managed account assets by better than half, from 3.8% at the end of 2002 to 6.0% at March 31, 2004.
"The banks have gotten religion when it comes to managed accounts," he said. "Many of them have been hiring local producers away from brokerage firms to build up their managed account practice."
Mr. Meyer said that, to realize this growth potential, Franklin Templeton plans to target registered investment advisers at banks while continuing to look for a major partnership such as the potential J.P. Morgan Chase link.
Banks' growth in managed accounts recalls their participation in investment banking, Mr. Meyer said. "If you look at the managed account area, banks are making far quicker progress in going up against the big boys than they did with investment banking," he said.
