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Business Challenges for the Managed Accounts Industry

Agenda. Program SponsorsAsset ManagersVendors. Cerulli Associates Managed Accounts Research. Decade-long pioneering coverage and analysisProprietary database tracking key attributes from more than 300 asset managers and sponsor programsCompletion of more than 200 in-depth interviews with senior management annually .

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Business Challenges for the Managed Accounts Industry

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    1. Business Challenges for the Managed Accounts Industry MMI Annual Convention Boston, MA April 20-21, 2004

    3. Cerulli Associates Managed Accounts Research Decade-long pioneering coverage and analysis Proprietary database tracking key attributes from more than 300 asset managers and sponsor programs Completion of more than 200 in-depth interviews with senior management annually

    4. Program Sponsors Rejuvenated Focus

    5. Advice Delivery: Rejuvenated Focus on Core Attributes Client Profiling Advisors working with clients to develop an understanding of their assets, liabilities, risk tolerance, and financial goals Asset Allocation Viable asset diversification model, and the specific model applied to each client is determined in the profiling process Ongoing Monitoring Advisors conduct regular face-to-face client visits, and make portfolio adjustments in adherence to investment plan Consolidated Statements Statements detailing account activity, including a client’s relationship with multiple managers and products Identifiable, Asset-Based Fee The fee paid by the client must be discrete and identifiable

    6. The Unified Managed Account (UMA) Is the Platform

    7. Specific Program Issues and Concerns Separate Account Consultant Programs Fee disclosure (financial advisors and end-clients), directed brokerage Mutual Fund Advisory Programs Pricing an issue with advisory overlay (2.46% total client fee after exp. ratio) Rep-as-Portfolio Manager Programs Mixed bag, portfolio management systems, sponsors increasing monitoring capabilities Fee-based Brokerage Programs Advisory or nonadvisory; a nondiscretionary advisory feature would allow firms to combine other advisory programs into a single delivery environment

    8. Multiproduct Delivery in Managed Accounts

    9. UMA Ramifications: Come Together

    10. Managed Account Groups (MAGs) Continue to Grow in Importance, but Challenges Persist Operations and Technology Connecting the plumbing for the UMA; Drive efficiency Asset Manager Due Diligence Integration issues with multiple groups combining (mutual funds and separate accounts); Broaden universe to include alternative investments? Evolving role of product development; UMA Portfolio Strategist, Overlay portfolio management, MSAs Platform Support (Sales, Marketing, Service) Training, training, training; Harvesting the next generation of managed accounts financial advisors Delivering a consistent and unified managed accounts message

    11. Platform Support Is Crucial: Spotlight on Sales & Marketing

    12. Tier 1 Advisors Account for Bulk of Historical B/D Managed Account Business

    13. Supporting the Platform Is Key to Advisor Retention

    14. New Channel: Private Client Groups (PCGs) Defined

    15. PCG Asset Management Delivery Models

    16. Centralized Platform: MAGs Will Increasingly Be Leveraged Across Global Affiliates

    17. Asset Managers Converging Marketplaces

    18. What’s Helping/Hurting/Complicating

    19. Profit Margins Converging

    20. Operationally Inefficient Marketplace

    21. Annual Redemption Rate Data for Separate Accounts Is Marginally Better than Mutual Funds

    22. Manager Decisions in UMA World Product Building and leveraging appropriate product lineup Mutual funds, Separate accounts, ETFs, Hedge funds, etc. Salesforce Effective organization and compensation structures Multi-product? (dedicated, hybrid, universal), Trails vs. commissions, Geographic vs. channel vs. demographic Distribution Relationships Developing and maintaining profitable relationships Number, Asset quality, Marketing and servicing support, Operations and technology

    23. Vendors Leveling the Playing Field

    24. Vendors

    25. Service Providers and Managed Accounts Broker/Dealers Broadening of managed accounts The advent of the Unified Managed Account platform New face of correspondent clearing Asset Managers Lowering operational costs (back-office functions, workflow, etc.) Enabling new products (MSAs, Overlay Management) Connecting the dots of distribution through platforms

    26. Mutual Fund-Like Industry “Plumbing” for Separate Accounts?

    27. Third-Party Vendors: Consolidation to Continue

    28. Enter Stage Left: Clearing Firms Impacting TPV Marketplace

    29. Platform Spectrum: Unbundling Functions

    30. Concluding Thoughts The increasing importance of advice in retail distribution is broadening Managed Accounts to new outlets and deepening advisor penetration. Fee-based drivers, Platform access, Simplicity, Advice The Unified Managed Account (UMA) is the platform that simplifies and integrates. Single port of entry, Increased fee-based business, Product neutral Asset manager salesforce and operational decisions can drive efficiencies. Managers need to look for organizational leverage points. Corporate structure, Product line legacy, UMA implications

    31. Further Information

    32. Appendix

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