Dan McNamara, the managing director of Bank of America Corp.'s consulting services group, says he was worried a year ago that B of A 's unified managed account platform would never get off the ground.
The launch was delayed twice last year, and the launch set for the middle of 2006 did not materialize until November.
But the Charlotte company's Portfolio Strategies-Managed platform is starting to get attention from wealthy investors, and Mr. McNamara said he expects it to have double-digit annual growth.
"Every day this becomes a larger component of our overall business," he said. "I think that it'll clearly be our fastest-growing fee-based solution next year."
Unified managed accounts allow an adviser to assemble multiple products - including managed accounts, mutual funds, and exchange-traded funds - on a single platform. They have been hyped for the past three years as the future of fee-based investing, and caught fire in 2006 as demand grew among banks for an advice-based, open-architecture model.
Ten percent of banks surveyed from August to October by Dover Financial Research said they were offering unified managed ccounts, but 60% said they were developing or planned to develop a platform within 12 months.
Jean Sullivan, a managing principal at Dover, said at a conference in September that many banks were skipping separately managed accounts - portfolios of stocks from one manager- and going right to the next generation - unified managed accounts, which can combine offerings from a group of managers and can include SMAs.
"We are really surprised that banks are this far down the curve on unified managed accounts," she said in an interview at the conference.
Assets held in unified managed accounts rose 36.8% industrywide in this first six months of this year, to $26 billion, according to Dover's research.
According to Dover, the number of firms offering unified managed account programs rose 22%, to 13, in the six months. The Boston consulting firm said this is a conservative estimate, because third-party providers such as Placemark Investments, Parametric, Lockwood Advisors, and Brinker Capital are each represented as a single sponsor firm, and all four of those companies are creating platforms that are outsourced to other financial services companies.
Jeff Strange, a Cerulli & Associates analyst who wrote a report on the UMA industry, said firms offering the product have had double-digit growth quarter over quarter this year.
"The industry wasn't ready for this product until now," Mr. Strange said. "Now, the message is out there and firms understand how to work the product into their advice offering. As it continues to show up in more media outlets and at more conferences, there is a trickle-down effect to the advisers."
Banks' relatively late arrival to separately managed accounts is benefiting them because it has allowed them to leap straight to unified managed accounts, Mr. Strange said.
"Some banks are finding it easier now to just use third-party vendors like Placemark or Parametric and getting directly into offering unified managed accounts," he said. "At most banks there are so many silos. By outsourcing to a UMA platform, it gives them a centralized platform across everything."
Placemark Investments, an investment manager that outsources unified managed account platforms, doubled its assets under management, to $4 billion, from April to the end of November, the latest period for which figures were available.
Randy Bullard, an executive vice president at Placemark, said 90% of the Dallas company's relationships are with financial institutions.
"This is the easy way to get out of proprietary products and into open architecture," he said. "By launching a UMA platform, suddenly you are raising the bar instead of running away from something that wasn't working."
Wachovia Securities turned its three-year-old separately managed account platform into a unified managed account platform this year.
That is recognized by Cerulli as the largest UMA platform - with assets of $11.623 billion - but Bob Vorlop, Wachovia Securities' director of investment products, said 99.9% of the program's assets are in separate accounts.
"We want this program to evolve to hold other assets than just SMAs," Mr. Vorlop said. "By adding mutual funds to this platform, it enabled us to walk into the UMA space. Ultimately, we want this to be a full-fledged UMA program."
Offering a unified managed account platform rather than just a separately managed account platform allows Wachovia to reach a wider range of investors and still deliver the same level of asset-class diversification, he said.
Mr. Strange said large banks like Wachovia, Wells Fargo, and Bank of America built their own platforms. "This is a chance to bring in a lot of assets with a very sophisticated solutions and move to an open-architecture environment," he said. "Open architecture is an important piece of all of this. A UMA platform allows banks to offer a broad range of asset managers."
Lockwood Advisors Inc., a unit of Bank of New York Co. Inc.'s Pershing Group Inc., is regarded as a UMA leader; $714 million of its $23 billion of assets under management are in unified managed accounts. Bank of New York bought Lockwood, which specialized in separately managed accounts at the time, in 2002, and Lockwood came out with a UMA platform in 2004. (This month Bank of New York announced a deal to merge with Mellon Financial Corp.)
Two and a half years ago Lockwood began offering a UMA consisting solely of Lockwood products; now it is creating UMA platforms for other institutions. In mid-2006 the Malvern, Pa., firm unveiled a UMA that offers companies the tools to build their own platforms, said Leonard Reinhart, its chairman and chief executive.
Assets have poured in since the summer, when Lockwood kicked off a sales campaign for its UMA, Mr. Reinhart said.
Mr. Bullard said it will be difficult for Placemark to maintain the growth it has had in the past seven months, though he expects to announce four or five large new relationships as well as deals with smaller registered investment advisers and regional brokers next quarter.
"Our internal projections are to keep the same growth curve through 2007," he said. "I really don't want to project beyond that."
