Managed Account Sponsors Deprioritize Platform Consolidation in Favor of Other Strategic Initiatives

October 22, 2021 — Boston

As managed accounts providers shift their focus from platform consolidation to other initiatives, they should not lose sight of the long-term gains this enterprise provides

Managed account sponsors continue to look to consolidate their platforms to a single-account architecture, but competing priorities and other challenges have hindered many sponsors’ efforts thus far. Despite these obstacles, Cerulli recommends firms continue to make gains with the end-goal of reaching a unified managed household (UMH).

Platform consolidation provides myriad benefits. For sponsors, oversight of managed account programs and client accounts becomes far more streamlined on a unified chassis. “For advisors and their clients, a unified account simplifies paperwork, reduces client questions, and allows for a holistic view of all client assets,” says Matt Belnap, senior analyst. However, other priorities have risen to the fore. According to Cerulli’s research, the top-two priorities for managed account sponsors are increasing the use of home-office managed account products and providing better portfolio construction support for advisors, with 45% and 39% of sponsors selecting those two choices, respectively.

Platform consolidation continues to remain an important goal. More than one-third (37%) of managed account sponsors rank platform consolidation as one of their top-three priorities in 2021, making it the fourth most popular priority for sponsor firms this year. According to the research, one-third (34%) of managed account sponsors are planning to integrate onto a single account infrastructure but have not yet made the change, while another 7% of sponsors are counting on their turnkey asset management program (TAMP) or custodian to make the changes for them. In all, a slight majority of managed account sponsors (55%) plan to consolidate, or have consolidated, to a single-account infrastructure, while the remaining 45% plan to allow various programs to exist on different platforms.

Ultimately, Cerulli believes that platform consolidation is a worthwhile endeavor and can lead to a better experience for managed account participants. However, Cerulli also believes that the move to a unified account is an important first step toward an even greater goal: the unified managed household. In the UMH, all household assets are aggregated in one location and the client’s full financial picture can be managed holistically. A key aspect of the UMH is asset location, placing investments and asset classes in the most advantageous location across a client’s various investment accounts, which creates the opportunity for substantial tax alpha.

“The UMH, and the holistic financial advice and tax alpha that it provides, are increasingly attainable,” says Belnap. “An important first step, though, is the consolidation to a UMA, toward which sponsors slowly and steadily strive.”

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Managed Accounts Edition, 3Q 2021 Issue.

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