Yield of Dreams

By Popular Demand: Ed Jones Makes First Foray into UMAs

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ED_JONESAfter working on it for nearly a year, Edward Jones has rolled out its first Unified Managed Account, an effort born out of popular demand by the firm’s advisors. The new platform, which will include SMAs, mutual funds and ETFs, gives even more credence to the popularity and growth of the investment vehicle.

According to the Money Management Institute and Dover Financial Research’s 2010 industry overview:

Research findings reveal that all of the major sponsor firms have shifted or are in the process of shifting to model portfolio programs.

The trend toward UMAs is being driven by economics, efficiency and the complexity of maintaining a hybrid program, the report said. But the overview also points out that under the UMA structure, the underlying SMA managers earn about 40-50 percent less, as the sponsor firm is the one maintaining the SMA investment model and conducting trades.

Frank Campanale, vice chairman at First Allied Securities, who’s known as the father of UMAs, said the UMA model would gain even more traction under a fiduciary standard of care, as communication between client and rep would be even more key. Under a fiduciary standard, advisors would take more responsibility for their clients’ asset allocation, something that’s an area of concern, while a UMA platform would offer a turnkey platform in which money managers are already vetted. “Advisors are concerned, and they want to make sure all their ducks are aligned,” he said.

While growth of the UMA is certainly there, recent data by Horsesmouth and kasina found that 41.7 percent of advisors that use ETFs do so within “Rep as Advisor” platforms, while only 7.7 percent use ETFs through UMAs. We’ll have to wait and see how the push-pull actually plays out.

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