I was asked to comment on a piece in yesterday’s FundFire (A Financial Times Service) concerning the future of UMAs. While UMAs have grown considerably – assets have grown 84% in the past two years – the overall size of such programs, at $237.5 billion according to Cerulli Associates, is still far below that of SMAs (which are approaching AUM of almost $750 billion).
There are a number of reasons why UMAs have not grown as quickly as forecast when they first were introduced – among them the market crash of 2008. More recently, a plethora of new types of managed account programs – including, ETF, advisor-managed and alternative investments – have introduced competition that many had not foreseen a few years ago.
While the growth until now has been somewhat disappointing, many in the industry remain hopeful that the future is still bright for UMAs. I agree, but also think that these other types of fee-based programs – including SMAs – will also continue to grow, and therefore UMAs will not become as dominant as many thought they would once be. Certainly not an SMA killer!
A few things do bode well for the continued growth of UMAs – the move toward model programs being run by the sponsor, which should actually help grow all types of programs, the emphasis at the traditional brokerage firms on promoting UMAs to its newer and younger advisors, and the conversion of some platforms to UMAs (some might call it “forced” conversions.)
Technology is also going to keep advancing, and this may help UMAs in particular because of their flexible nature and because unlike some of the more product-specific programs, the ability of UMAs to hold multiple types of investments makes them attractive to a wide variety of investors and advisors.
What do you think the future holds for UMAs?
Tags: Ceruli, ETFs, Fee-based programs, SMAs, UMAs
