Unified Managed Households: The Holy Grail of Wealth Management?

This is a summary from a session from the MMI Tech & Ops 2012 Conference held in Jersey City, NJ last December. The subject of this panel was the Unified Managed Household (UMH) and the challenges and issues around planning, implementation and support.


  • Gary Jones, Vice President for Industry Operations, MMI.


How do you define what UMH is?

UMH is a value proposition for advisors, Morris stated. It is an opportunity for advisors to demonstrate their value and make better decisions.  Fortigent is a “Super-RIA,” he commented, their average client size is between $10-12 million and they use a lot of alternative investments.

Some advisors are worried that technology will make them obsolete. UMH is really more of an aggregation and articulation tool rather than the be all and end all solution, he observed.

UMH is nothing new in the industry, Bracken claimed. It’s what good advisors have been doing for years. They’ve been providing a “manual” UMH using various technology and legal pads.

Investors have many different accounts that can’t be combined, such as Roth IRAs, SEP IRAs and Traditional IRAs, Bracken noted. But advisors still need a way to review and talk about all of their accounts with their clients. Whether UMH or another technology solution is used, it must be part of an efficient and replicable process that can support Ultra-High Net Worth (UHNW) as well as emerging High Net Worth and Mass Affluent clients. Fidelity is looking to their technology partners to help make their existing UMH more efficient, he said.

Challenges of Implementing UMH Technologymonty-python-image-1

Vestmark has been providing UMH capabilities for six or seven years, Pathak said. A UMH could combine account across multiple custodians and multiple discretionary entities. The challenge is to provide advisors with enough flexibility while still maintaining proper compliance oversight, he warned.

Another challenge is making money with UMH.   Since it is more of an advisory solution, not a product, there is a question as to whether you can charge directly for it or does it get lumped into the cost of doing business. Charging for advice on held-away assets is also hotly debated among advisors, he noted.

Technology is fragmented across the advisory process and involves discrete activities, Braken said. For example, an advisor may use Naviplan for goal planning, then print out a report or export the data into their asset management system. It becomes more complicated when dealing with UHNW clients as they move through their lifecycle, since there isn’t a good unified technology solution available now that can put all of this data together between financial planning, investment management and reporting, he noted.

Some of the advisors that come to Fortigent are already using 4 or 5 different technology platforms, Morris reported. They have implemented better UMH structures by requiring advisors to think about asset location up front. what happens when you need to make a change and the allocation is no longer appropriate? There’s no good way to move assets between different accounts. Multi-custodial reporting, with positions that are above and below the line. most of their advisors just lump the below the line positions together into a single number, since they have no control over them. Sometimes BTL is just a number, sometimes advisors try to show that their performance is better, Morris said.

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What are some of the methods of dealing with the tremendous amount of data that’s available?

The complexities of data management often increase as a firms grows over time, Bracken commented, especially as existing systems or data structures are modified to support new requirements. He pointed out that Fidelity has seven different definitions of a household (i.e. pricing household, statement household, relationship household, etc.) that were all created for specific reasons and which may not be best suited to act as a starting point for new features. Sometimes it could be better to start with a clean sheet of paper and build from scratch instead of trying to add layers onto an existing system, he warned.

According to Pathak, firms that have banking and broker-dealer clients often don’t believe that they can safely combine data across both business entities. This is primarily because each side is regulated by different government agencies (SEC vs OCC) that require their own views of the data. Also, each part of the business has their own systems that use different representations of the client’s data that are difficult to reconcile, he said.

One way to avoid the problems of combining disparate client data is by starting fresh, Pathak offered. However, by doing this you lose the benefits of data mining. The Vestmark UMH solution can combine data from different parts of a firm, as long as there is a common client definition, they can perform a network path analysis that discovers hidden relationship across households and creates an uber-household for a family, he said.

If this UMH functionality works as well as Pathak claims, it would be very valuable to firms that want to designate a central relationship manager for large families that have accounts located in different parts of the business. By creating the concept of sub-households, Vestmark provides top-down and bottom-up analysis and reporting that provides more holistic client management, he said.

Fortigent has 103 different custodial feeds, Morris stated, which greatly increases the complexity of their systems and reporting. They have one client report with 22 different data sources, each of which can be updated at different frequencies. It is sometimes challenging to explain this to clients since the multiple layers can be confusing to them. The advisors would rather be spending their time talking about the clients goals and future plans, 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 craig@ezragroupllc.com