What You Need to Know About Unified Managed Accounts (UMAs)
A Unified Managed Account (UMA) is an expertly managed private investment account that can consolidate multiple types of investments, such as mutual funds, stocks, bonds, and exchange-traded funds (ETFs), all within the same account. These accounts are often rebalanced periodically to maintain the desired investment balance.
Key Benefits
- Diverse Investments in One Account: A UMA allows you to maintain a variety of investments including mutual funds, stocks, bonds, and ETFs, eliminating the need for multiple accounts.
- Regular Rebalancing: Typically, UMAs are rebalanced on a scheduled basis to ensure your portfolio maintains its strategic allocation.
- Tailored for High Net Worth Investors: High net worth investors often prefer UMAs due to the wide range of investment options they offer compared to separately managed accounts.
- Comprehensive Service: UMA providers assist with portfolio integration, tax planning, and creating an effective rebalancing strategy.
Understanding Unified Managed Accounts
The UMA has emerged as a favored option for high net worth individuals seeking a more integrated and efficient way of managing their assets. Unlike the prior alternative, the separately managed account (SMA), which typically focuses on singular investment strategies, the UMA is designed to consolidate various types of investments and asset vehicles into one account.
By combining multiple investments, a UMA offers a streamlined solution for investors desiring to diversify their holdings without managing several separate accounts. This account type reduces complexity and management fees as economies of scale kick in—with fees generally lowering as Assets Under Management (AUM) increase.
Investing Through a Unified Managed Account
Banks and brokerage firms are the principal institutions offering UMAs, but the availability has expanded to include registered investment advisors and private wealth managers, thanks to advancements in technology. UMA providers shoulder significant fiduciary responsibilities given the multitude of investment types they manage, from stocks and employee stock options to third-party separate account management.
UMA providers collaborate closely with high net worth clients to aggregate all their assets for cohesive management. The UMA planning process encompasses creating comprehensive investment strategies, often utilizing modern portfolio theory to optimize for risk and return.
Further benefits include streamlined reporting and robust tax planning support, enhancing the client’s overall financial strategy. Rebalancing schedules are customized to align with the investor’s broader investment goals and objectives.
Fees and Standards
The management standards for a UMA can differ among providers. Investors typically sign agreements that detail account management, fees, and allowable investments. Annual management fees are usually based on total assets under management and tend to decrease as those assets increase, ranging from 1.50% to 3% per annum.
Related Terms: Mutual Funds, Exchange-Traded Funds, Separately Managed Account, Assets Under Management, Rebalancing.
