Separate Accounts Capture More Assets

PMFM has caught onto a trend, or is perhaps helping cause the trend, with its emphasis on the use of separate accounts for its clients portfolios. Growth of assets in separately managed accounts (SMAs) was brisk in 2006, and that growth is likely to continue in 2007. A growing number of SMA platforms are available to advisors, and some firms are creating unified managed account (UMA) platforms designed to hold multiple SMA, mutual fund, stock, fixed income, and other types of assets in a single account, simplifying account management and statements. Some SMA minimums are being lowered, allowing more investors access to this type of customized money management.

SMAs captured $805.8 billion in assets for the year ended September 30, 2006, an increase of 24.8%, or $160 billion year over year, according to the Money Management Institute and its partners Financial Research Corporation and Dover Financial Research. The estimated number of accounts has reached 2.52 million, up from 2.13 million year over year, and up sharply from 1.66 million as of the end of 2001.

By far, the lion's share of SMAs are sold by wirehouses: 78.4% of SMAs were distributed by wirehouses for the year ended September 30, slightly off the prior year's 78.8%. Banks follow distantly with 8.1%, up from 7.0% year over year. Third-party distributors sold 6.8% of the accounts up from 6.1%, while regional firms actually distributed fewer SMA accounts, 5.5% versus 6% for the prior year. Independent B/Ds so far distribute relatively few SMAs, 0.9%, up from 0.7%.