Unified managed accounts are a necessity, not an accessory, at banks that want to compete for wealthy customers, an executive at AmSouth Bank said in an interview.
These products "are the way of the marketplace," said Carol Deckbar; "the marketplace somewhat pushed us there."
"To compete and satisfy the customers, you have to have this product," said Ms. Deckbar, a senior vice president of wealth management and product development at AmSouth in Birmingham, Ala.
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 they have an opportunity to develop assets and revenue by offering fee-based products such as unified managed accounts, Ms. Deckbar said, and separately managed accounts. Banking companies or their affiliates like Wachovia Corp., Citigroup Inc., KeyCorp's McDonald Financial, and PNC Financial Services' PFPC Worldwide Inc. have launched unified managed account platforms. And a trade group reports that banks continue rapidly expanding their share of managed account assets, a field still dominated by big wire houses.
Wachovia started its unified managed account platform - Diversified Managed Allocations - in December 2002 and by Aug. 31, 2003, had accumulated $500 million through it. As of this July 31, it had $2.57 billion of assets under management on the platform.
Ms. Deckbar said she hopes the product will help spur similar growth in the wealth management unit of her $48 billion-asset bank, which oversees $25.5 billion of trust assets.
"Banks are buying brokerage firms that moved into offering unified managed accounts five years ago," she said. "That is who we are competing with. The customers have the choice. They can go to these bank-brokerage firms, or they can stay with us. We have to be able to offer similar products."
AmSouth started its unified managed account platform last week. AmSouth Answers lets clients manage different investment products in one account. The product gives high-net-worth customers access to an open architecture array of 40 separately managed accounts and 80 mutual funds and exchange-traded funds in a spectrum of asset classes. Ms. Deckbar said the bank believes the customer sweet spot for this product is $250,000 to $1 million of assets.
Ms. Deckbar said that AmSouth, before introducing its platform, had offered proprietary managed accounts. But the selection was limited to bond, large-cap growth, large-cap value, core growth, and core value accounts. Offering an open architecture product array lets AmSouth add high-yield, hedge, emerging markets, and international products.
Banks have been slow to adopt an open architecture model on their sales platforms, and their hesitance to innovate is costing them customers, research indicates, especially customers with more than $5 million of investable assets. Banks managed 62% of this group's assets in 1992 but only 24% by last Dec. 31, according to a report from Celent Communications.
"Being a bank with trust capabilities isn't enough any more," said Burton Greenwald, a Philadelphia analyst. "Investors, especially wealthy investors, have a lot of options."
AmSouth is in partnership with SunGard Advisor Technologies Inc. to provide the technology and investment manager due diligence needed for offering the unified managed account platform."Sometimes, coming late to the game is better," Ms. Deckbar said. "We missed the early evolution of" unified managed accounts. "We are lucky enough where the technology has evolved. Now we can hold anything on one platform, while some of our competitors have their products on different technology platforms."
Ms. Deckbar said wealthy customers are interested in unified managed accounts because they supply the two things these investors seek - advice and choice - and banks have a good opportunity if they offer the product correctly.
A study by Spectrem Group, a Chicago consulting firm, said 62% of American households with more than $500,000 of investable assets have a financial plan. But of affluent investors who have a financial plan, about half turned to an adviser they were already using for some other purpose to help them devise it, the report said.
"Investors are willing to work with banks if they carry a full array of products and services, and that includes unified managed accounts," Mr. Greenwald said.
Ms. Deckbar said AmSouth Answers is the first step in a three-year process. The bank wants to introduce a multidisciplinary account by the first half of next year, she said, noting that such an account would let it offer greater diversity at a lower threshold of investment.
Currently, she said, a customer can invest in a single managed account with one investment style for $100,000. But a multidisciplinary account would let the customer invest in a managed account with four investment styles for $100,000.
Ms. Deckbar said that as a third step for wealthier customers, AmSouth is looking to start an overlay account by the end of 2005 that will let the bank be the "manager of managers" for several managed accounts.
"The unified managed account is really the first step here," she said. "It is a necessity for us to maintain our business plan and to launch future products to continue to gather assets."
Industrywide, assets in separately managed accounts grew 19.4% from June 30, 2003, through the same date this year and 6.3% in the first six months of this year, according to a report Tuesday from the Money Management Institute. Managed account assets reached $528.7 billion overall, up from $497.3 billion at Dec. 31.
The institute forecast $59 billion of net managed account sales this year, a 90% increase over the $31 billion of net sales last year. In 2005, the institute said, it expects $80 billion of net sales.
TowerGroup Research has projected that managed accounts will grow at a compound annual rate of 18.5% - from $399.7 billion in 2001 to $1.1 trillion in 2007. Banks' share of managed account sales grew from 5.9% at the end of 2003's first quarter to 6.7% last Dec. 31 and 7.2% at March 31, according to Money Management Institute data.
Chris Cosentino, a spokesman for the institute, said other channels have been "flat to slightly down" during the same period. "Banks are developing a growing share of a growing pie," he said.
