For years, financial advisers who recommend individually managed accounts (IMAs) to their clients have used a consulting process that includes three basic steps: setting investment objectives, searching out and selecting money managers, and continuing oversight.

The IMA consulting process evolved from the post-ERISA pension consulting process, and it is an excellent way to build an investment strategy. The process' only weakness lies in its starting point. The very fact that we call it the “IMA consulting process” pinpoints a potential difficulty, because a consulting process should begin with a goal and end with a solution.

The problem is that the end of the “IMA consulting process” has always been individually managed accounts. We began the process of defining a goal with the solution already in place! For 25-plus years, the process ended in the adviser recommending one or more IMAs. When mutual fund wraps came out, advisers used the same process, but also had a one-product solution, mutual funds. This single-product solution limits, and at times cripples, the process. Thankfully, it is dying out.

Today, the investment consulting process includes consideration of all available investment products, and that's not only a good thing, it's inevitable. Advisers use a consulting process to define an intelligent strategy, then look at IMAs, along with many other products, to find the best product mix for implementing the strategy.

You can start to see this trend developing at the major wirehouses. The consulting process, once confined to the managed account division, is being elevated and encouraged firmwide. The firm now controls the process, including financial and estate planning. The IMA has become one of many possible product solutions the firm offers.

Independent advisers, who generally come from a planning background rather than an investment background, have always begun their process with the plan as their goal and then solved for the right products. Their problem has not been having limits on their process, but rather their lack of a broad product line. IMAs have been available to independent RIAs for only the past seven to eight years and only on a restricted basis. Now that IMAs are readily available to independent advisers, they are integrating them into their solution set, not imposing them on their process.

Like it or not, the IMA is a product. It is no better or worse than a mutual fund or an annuity. It simply has different features that make it more attractive to certain types of investors and more appropriate for certain investment situations.

If you compare IMAs with mutual funds as products, you start to see that they do not represent a radical change, but a natural evolution. Think of it this way: When jet airplane engines were introduced into what had always been a propeller-based industry, the goal of transportation didn't change. Airports lengthened their runways, but remained basically the same. Today, both prop planes and jets coexist, serving specific purposes with the overall result being better service to the end user.

Once you see IMAs this way, the distribution possibilities expand dramatically. When program sponsors adopt this view, the way IMAs are manufactured will start to change. The IMA, as a product that can be plugged into different processes, will find its place in many more investment strategies than it has while the “IMA-only” attitude prevailed.

Len Reinhart is president, CEO and chairman of Lockwood Financial Group, an investment management consulting firm with offices in Malvern, Pa., New York and Dallas. He also serves on the board of the Institute for Certified Investment Management Consultants. He can be reached at