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4 FOR HOME OFFICE AND ADVISOR USE ONLY. NOT FOR DISTRIBUTION TO THE PUBLIC. Handle Billing at Both the Household and Individual Account Level Because a household is often made up of different types of accounts, there may be occasions when different billing rules apply to accounts across the household. To properly account for these variations, a billing solution needs to be able to customize billing at both the household and the individual account level. Additionally, this must be done taking into the overall assets of the household to determine the appropriate fee rates for each account. 76% of managed account sponsors consider household based pricing to be a very important characteristic of a unified program. 3 Multi-Manager Billing Since a UMA can hold many different SMAs, the billing system must accurately calculate the fee for each investment manager, which many times is driven by investment strategy selection. Moreover, sponsors often have separate contracts with each manager that offer asset-based tiers that reduce the fees at certain asset levels. These asset levels sometimes reference individual account level assets, but other times references household or overall manager level aggregated assets. This adds a complicated layer onto an already complex process. Billing Exclusions Similar to fee schedules, billing exclusions can also be applied at the household, account or sleeve level. For example, an account might hold a stock position that a client has held for years and has no intention of selling because of the tax consequences. The advisor will often exclude the stock from billing since it is not being actively managed. Billing exclusions can also take the form of entire asset classes such as cash and cash equivalents. When multiple clients have multiple exclusions of different kinds, tracking them all can be challenging. Communication Between Operations and Sales While landing new business it is essential to ensure that salespeople understand the limitations of your billing system well enough to communicate it to clients. Without this training, a salesperson might incorrectly promise a client that their fee will decrease after reaching a certain asset level, or that some assets will be excluded from billing. While many such scenarios can be handled by a firm's billing systems, as their numbers increase, so do the chances that Sales is making promises that can't be kept by Operations. As a result, periodic billing training for salespeople is highly recommended to avoid unpleasant conversations with disappointed clients — or off-book workarounds that increase regulatory and reputational risk. Best Practices for UMA Billing Given the complexity involved with UMA billing, what are some best practices firms can follow to optimize their billing results? 3 Cerulli Report U.S. Managed Accounts, Cerulli Associates, 2018. █████████████████ Ì20000F905DÎ

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