RBC Dain Rauscher says it hopes a new unified managed account platform will help it target mass-affluent customers with services once reserved for the ultra-wealthy.
"I think that unified managed accounts enable us to provide managed accounts to people with between $250,000 and $500,000," said Erik Preus, the director of investment consulting services at RBC Dain Rauscher, the Minneapolis brokerage unit of Royal Bank of Canada. "Firms that are offering unified managed accounts have found them very appealing for affluent customers."
RBC Dain Rauscher, the nation's eighth-largest full-service securities company, with $108 billion of assets under management, including $16 billion of fee-based assets, introduced its RBC Total Portfolio last week. The platform features an open architecture array of products and services that let financial consultants offer a diversified portfolio of products including managed accounts, mutual funds, and exchange-traded funds to clients with as little as $250,000 of assets.
Mr. Preus said that offering unified managed accounts will give RBC Dain Rauscher the ability to compete with larger brokerage companies.
"We need a strong platform and a robust product offering that will enable us to gather assets that otherwise would have gone to someone else," he said.
Unified managed accounts put all of a wealthy client's investment products - managed accounts, mutual funds, annuities - in a single account that is managed and diversified across the spectrum of products within it.
Banks have known for a while that they have an opportunity to develop wallet share by offering fee-based products such as unified managed accounts. Banking 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.
Wachovia started its unified managed account platform - Diversified Managed Allocations - in December 2002 and by Aug. 31, 2003, had accumulated $500 million through it. By this July 31, it had $2.57 billion of assets under management on the platform.
Analysts said most large banking companies have been tentative until recently about taking unified managed accounts down-market. When AmSouth started its platform in August, however, it said its sweet spot for the product was customers with $250,000 to $1 million of assets.
"Unified managed accounts can offer a lot of customization, and that can attract a lot of aspiring wealth," said Kevin Daniels, a Boston analyst. "Banks have the opportunity with this platform to attract the wealthy before they become wealthy."
The remaining hurdle, though, is maintaining relationships with ultra-wealthy customers, Mr. Daniels said. Banks cannot afford to alienate ultra-wealthy clients who seek specialized, exclusive products, he said, and these customers might be put off if the product is made available to a relatively large number.
Mr. Preus said unified managed accounts are flexible and can be customized for ultra-wealthy investors to offer significant tax benefits. "We expect unified managed accounts will be a core fee-based product offering for even the most affluent customer," he said.
The program is expected to be rolled out to all RBC Dain Rauscher financial consultants in October after a pilot program this month. RBC Total Portfolio was introduced with Placemark Investments of Dallas as the overlay manager. Placemark inaugurated its unified managed account product in the fourth quarter of 2002 through a partnership with McDonald Investments.
Lee Chertavian, Placemark's chief executive officer, said Placemark has been successful in bank partnerships. He said he expects to begin offering Placemark's unified managed account platform through a "major money center bank" in the next few weeks and through a "major multinational bank" by yearend.
"This is an ideal product for banks," he said. "Banks are learning a little more about how it is important to move clients from a traditional trust model to an open architecture platform."
Ever-larger banks are becoming interested in unified managed accounts, Mr. Chertavian said. "Initially, this was used by midsize banks," he said. "Now banks with good money management operations already are looking to add this platform on."
Ann Senne, a senior product manager at RBC Dain Rauscher, said of the new product, "This is where the industry is going."
