Issue link: https://resources.envestnet.com/i/1541917
1 FOR HOME OFFICE AND ADVISOR USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC. At look at UMA Programs UMA accounts have increasingly grown in popularity and represent the second fastest growing managed account program behind RPM/RPA. As of the end of 2018, UMA assets totaled $992.5 billion, sustaining a 5-year compound annual growth rate (CAGR) of 26.8 percent. 2 2 Cerulli Lodestar Asset and Growth Rates by Program Type, Cerulli Associates, 2009–2018. $992.5B 26.8% CAGR Introduction Fee-based advice has been growing steadily for the past twenty years despite fee compression driven by robo-advisors and passive management strategies. This has pushed wealth management firms to start looking for ways to make their managed account programs stickier (less likely for clients to leave) and provide added value, both in service and performance. Unified Managed Accounts (UMA) programs were the perfect fit to solve these problems. They enabled wealth management firms to hire external managers at an affordable cost, while reducing the overall costs of multiple custody accounts. These benefits have led to strong growth in assets as they have grown from $119 billion in 2010 to $993 billion by the end of 2018. 1 Cerulli Associates projects that assets in UMAs will nearly double by 2022 to an estimated $1.85 trillion. However, UMA programs are complex and require a billing system that can effectively handle their multi-class, multi-party functionality, which bring a diversity of fee schedules and computational approaches. Studies have shown that the most efficient way to process UMA accounts is with dedicated billing software specifically designed to work with UMAs. One-size-fits- all portfolio management platforms are often unable to support the complicated calculations and configurations associated with the variety of billing arrangements supported by UMAs. A specialized billing tool may be able to solve this dilemma, but research should be done to make sure that such a solution is compatible with the firm's existing practice management software. The characteristics of a robust UMA account billing solution correspond to four major trends driving the development of cutting- edge billing software. These are: • Accuracy • Timeliness • Control checks • Auditability This paper will first explore the factors behind the growth in UMA assets, then dive into best practices for UMA billing. Next, it will explore the factors driving complexity of UMA account billing and analyze the problems one- size-fits-all solutions often experience with UMA billing. Finally, it will look at how specialized billing systems efficiently handle UMA billing and the benefits firms can derive from them. 1 Cerulli Lodestar Total Number of Accounts by Program Type, Cerulli Associates, 2011–2018. Wealth Manager Why Wealth Management Firms Need Better UMA Billing █████████████████ Ì20000F902)Î