U.S. Bancorp has become the latest large bank to roll out a unified managed account platform.
Its U.S. Bank subsidiary in Minneapolis introduced the platform this month, not long after Bank of America Corp. unveiled its own product and SunTrust Banks Inc. announced plans for its version.
Mark Jordahl, the president of U.S. Bank's wealth management division, said clients' changing needs prompted the bank to develop the product, which is offered through its private-client group.
"As we counsel our clients on how to achieve their financial objectives, their portfolios are becoming more and more complex," he explained.
Unified managed accounts are products that can contain virtually any investment vehicle, from stocks and bonds to mutual funds and exchange-traded funds. They can be managed to minimize taxes and avoid redundancy in investments.
Separately managed accounts, which have been around longer, are similar, but in general one account is required for each kind of investment.
Alois Pirker, a senior analyst at the Aite Group LLC research firm, said that unified managed accounts, which hold 15% of the separately managed account market's assets, could grow to a 35% share by 2010 or even earlier.
One reason why, he said, is that banks are embracing them more readily than they did the predecessor separately managed accounts. Unified managed accounts, he explained, put more fiduciary control within the bank rather than leaving decisions to outside managers. Model-based unified managed accounts let outside managers make investment recommendations without executing the trades. "Banks had been cautious about SMAs because of fiduciary responsibilities," Mr. Pirker said. "But UMAs allow them to do rebalancing in-house."
Mr. Jordahl said U.S. Bank will not pressure its wealthy clients to move into unified managed accounts. The accounts do not offer a cost advantage over other investment vehicles but do make sense for those with complex investment portfolios, since they allow customization for clients' tax, risk, and investment preferences, he said.
"Given the capabilities of UMAs, and matching them against what our clients have asked for, we think demand for this will be very robust," he said.
U.S. Bank is targeting its unified managed accounts to investors with at least $1 million of assets. The bank's wealth management business has $89 billion of assets under management; the private-client group manages $64 billion.
Wealthy clients' portfolios used to be simpler, Mr. Jordahl said — they might consist of bonds, a couple of kinds of equities, and some cash. Today's portfolios might include all these things, plus alternative investments and several classes of equities, he said.
Smartleaf Inc. in Cambridge, Mass., is supplying the bank's unified managed account overlay technology. Each account is overseen by a portfolio manager who makes certain that "the portfolio is meeting its objectives, the managers are doing what they're supposed to be doing, and the portfolio ultimately reflects the client's objective," Mr. Jordahl said.
U.S. Bank's unified managed accounts include the equity recommendations of separate account managers along with mutual funds, exchange-traded funds, and bonds.
Large institutions like U.S. Bancorp, which has $223 billion of assets and is parent to the sixth-largest U.S. commercial bank, have plenty of competition in the unified managed account business.
Bank of America is expanding its unified managed accounts to target wealthy and ultra-wealthy clients. SunTrust plans to introduce a unified managed account next year. Oppenheimer Asset Management Inc., a unit of Oppenheimer & Co. Inc., targets investors with as little as $50,000 of investable assets and A.G. Edwards & Sons Inc. requires a minimum investment of $100,000.
