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July 2020, BOSTON—The technology build-out required to completely consolidate managed accounts onto a single platform continues to elude many managed account sponsors, and the COVID-19 market correction is contributing to the slow development, according to The Cerulli Report—U.S. Managed Accounts 2020.
Cerulli’s research, based on data collected in May 2020, reveals that more than one-quarter (28.6%) of managed account sponsors have paused their spending on technology products. While many firms are continuing to build out a unified advisory platform (UAP), other firms are rethinking this approach, allowing the possibility that some programs remain separate. In 2020, the percentage of firms planning to integrate all of their managed account platforms onto a single architecture dropped from 57% to 50%. At the same time, the proportion of firms indicating that they would allow various programs to exist on different platforms rose from 24% to 32%, indicating that firms may favor platform simplification instead of consolidation.
Some managed account sponsors do not feel that a unified platform fits into their business model. Independent broker/dealers (B/Ds), for instance, are in the business of attracting advisors by offering them—as their channel name suggests—the independence to choose investment solutions for their clients. As a result, independent B/Ds resist corralling their advisors onto a single platform that may limit the advisors’ choices. Instead, they support multiple turnkey asset management providers (TAMPs) and managed account solutions.
“Developing a complete UAP is a tall task that requires significant organizational commitment,” according to Tom O’Shea, director at Cerulli. “The technology and resources needed to combine various accounts into a single architecture, paired with the partnership with outside vendors and technology partners, as well as the allocation of important internal resources and budget, will cause many firms to take a hard look at the ROI of a project of this scale. They also need to factor in implementation, testing, and rollout to advisors, ultimately taking years to complete.” In 2020, the percentage of firms that believe their UAP will take greater than two years to develop grew from 67% to 75%, and the proportion that believe they will complete their UAP in six months or less dropped from 14% to zero.
At the same time, sponsors must remember that nontechnology features are also important parts of a consolidated platform. Managed account executives surveyed by Cerulli rate a single investment contract, integration of middle office services, and a single performance report just as high as a single technology portal. “Firms not able to complete a UAP should focus on unifying nontechnology elements of their platform as an interim step toward creating a fully consolidated architecture,” concludes O’Shea.
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—U.S. Managed Accounts 2020: The Evolving Landscape of Advisor Discretion.
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