Break Away from the Status Quo, Gardner Urges

“Doing more with less” is how R. Buckminster Fuller, in his 1973 book Earth, Inc., proposed that the human race improve its overall standard of living by improving efficiency in order to survive.

In his opening remarks at Financial Research Associate’s 8th Annual Managed Account Summit, Keynote Speaker David H. Gardner warned that the managed account industry needs to do the same. We must do it faster, with less risk and higher operating margins as well.  This must be done with less resources considering that 400,000 people laid off from Wall Street over the past two years, with even more to come.

David, a strategic consultant with DTCC/Smart Consulting LLC, also extolled his colleagues to embrace change. “Keep the status quo,” has been our mantra for too long. No other industry has had as long a life cycle as Single Managed Accounts (38 years), he said. The industry has remained largely unchanged even as processing and operational risk has increased, David charged.

We’ve been fighting amongst ourselves for a sliver of this pie, one that has never exceeded more than $1 trillion in its entire history. David pointed out that ETF’s currently dwarf SMA assets.  ETF AUM went over $1 trillion in 2010, while SMA assets are only around half that.  Even our fastest growing segment, UMA models, hardly registers with only $80 billion in AUM, which is less than the expected growth of ETFs this year alone.

David gave three reasons why managed accounts have maintained such anemic growth:

  1. They’re not nearly as scalable or operationally efficient as ETFs, Mutual Funds, etc.
  2. Sponsors have built proprietary infrastructures and haven’t promoted industry standards or best practices.
  3. Operations and processing are largely one-off and rely too heavily on manual intervention.

In the future, SMAs will only be a subset of a larger client portfolio that contains managed ETF sleeves, model-only sleeves, SMA sleeves with active portfolio management, David predicted.  Maybe an income-annuity and possibly a hedge fund sleeve, all optimized by internal or external technology that will be advisor-centric and/or advisor-led.  The Managed Solutions platform will continue to be “the platform” that wraps these disparate offerings into one client solution, he noted.



    The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at