Industry executives and analysts say they expect the next generation of fee-based platforms - unified managed households - to take off when introduced next year, and they see bank trust departments as well-positioned to succeed before wire houses can move on the idea.
Leonard Reinhart, the chairman and chief executive officer of the Lockwood Advisors Inc. unit of Bank of New York Co., said Monday that the unified managed household will be the next step in an evolution of unified managed accounts. The latter product, still relatively new itself, links a collection of investment products on one platform, including everything from separately managed accounts to mutual funds. It was introduced five years ago.
The problem with unified managed accounts, Mr. Reinhart said, is that the typical wealthy person has at least two kinds of account - a taxable investment portfolio and a tax-free defined contribution plan. The unified managed household would let people with at least $250,000 of investable assets manage both types of account on one platform.
However, an analyst says banks would miss an opportunity if they restrict these accounts to high-net-worth customers rather than exploiting their feasibility for the mass-affluent market.
Mr. Reinhart said the unified managed household will let advisers rebalance, allocate, and deliver performance reports for multiple plans.
The unified managed household platform is still in development, he said, and requires more technology to manage the tax implications of various accounts. He said he expects companies like Lockwood to introduce a unified managed household platform by next year.
"This product is evolving now, and the technology is coming in," Mr. Reinhart said. "The unified managed household will enable advisers to aggregate all of these accounts."
Charles "Chip" Roame, the managing principal at Tiburon Advisors in Belvedere, Calif., said data on the amount of assets in unified managed accounts is nebulous but that banks are well-positioned to succeed with both platforms.
"The unified managed household should be the core product of every bank trust department," Mr. Roame said. "A trust department is a managed-money culture that has the right technologies in place to create unified managed household platforms long before brokerage companies have the capabilities to create them."
Despite his optimism about the unified managed account platform, Mr. Roame said most advisers are still not offering it correctly. "I think these products are a lot harder than everyone thinks," he said. "To do these properly, an adviser has to offer consolidated allocation, rebalancing, and reporting, and truthfully few are doing it right and with the right technology."
"The implication of a true unified managed account is that it can be built with technology for the mass market," Mr. Roame said. "I think we are still six to nine months away from a true technology-driven unified managed account platform. Some people feel they have this already, but I think no one is doing it totally electronically yet."
Some large banking companies have offered unified managed accounts for years. Wachovia Corp. was the first to do so, in 2002.
Lee Chertavian, the chairman and chief executive officer of Placemark Investments, a Wellesley, Mass., company that distributes unified managed accounts, said banks, family offices, and independent wealth managers collectively manage 30% of the assets held in unified managed accounts. Brokerage firms manage 70%.
Brokers' share will fall to 40% within five years, he said, while banks' share grows to 40% and family offices and independent wealth managers' to about 20%.
Mr. Reinhart said he sees a big chance for unified managed accounts and unified managed households to grow as baby boomers retire.
"High-net-worth individuals are discovering that they don't have enough money to just move their money out of equities and into fixed-income when they retire," he said. "Most boomers can't afford to do that. … They have to build a plan so that they can continue to grow their assets over time in a predictable fashion."
A well diversified and well allocated unified managed account or unified managed household can achieve this, Mr. Reinhart said. "This is a product that looks at the next 30 years rather than the past 30 years," he said.
Mr. Roame said the new product is really a no-brainer at any level of wealth.
"This is financial planning 101," he said. " … An adviser has a responsibility to every one of his customers to consider allocation and tax planning carefully."
Mr. Reinhart said good advisers have been trying to provide these services on their own for 10 years but that the new technology will make it possible for advisers to focus on their customers rather than administering accounts.
