One Platform To Rule Them All: How Consolidation Transforms Wealth Management Systems

“Eventually, all things merge into one, and a river runs through it.”

— Norman Maclean, Author

In the past decade, we have seen consolidation across a wide swatch of the technology landscape. Cars have merged with computers to be able to drive themselves, televisions have merged with the Internet to offer more entertainment choices and cell phones merged with cameras, MP3 players, heart rate monitors and a myriad of other formerly separate devices.

This wave of merging technology is finally reaching the world of wealth management. The traditionally discrete products of mutual fund wrap (MFW), separately managed accounts (SMA), and rep as portfolio manager (RPM) are being brought together into unified managed accounts (UMA) as vendors and TAMP’s release new versions of their wealth management platforms that support an all-in-one mindset.

Transformation of Wealth Management Systems

wealth management systems
Merrill Lynch One

The wirehouses have been leading the charge with Bank of America’s Merrill Lynch unit spending $100 million to consolidate five managed account platforms into their Merrill Lynch One UMA platform. (See Merrill Streamlines Their Platform To Deliver UMH for Clients)

Since its launch in September 2013, Merrill Lynch One has brought in $37 billion of net new assets out of the $157 billion in total AUM on the new platform, according to a report from The Wall Street Journal.

Merrill’s 14,000 advisors love the new streamlined processes that have saved them significant time and effort for common tasks such as enrolling new clients, account transfers and preparing for client reviews.

As reported in an article from

There’s no direct financial incentive for advisors to transition new clients onto the Merrill Lynch One platform, but [Merrill spokesman Matthew] Card says many advisors see the new technology as a time saver, noting it now only takes an advisor 10 minutes on average to enroll a new client.

“Platform consolidation projects are growing in popularity due to the benefits that can be generated,” observed Brett Ginter, Principal, Compass Bay Associates, a wealth management consulting firm.

“Some positive outcomes from these projects include upgrading business capabilities and technology, lowering the total cost of ownership and providing a more holistic/strategic platform that can adopt to future requirements faswealth management systemster than environments that have not consolidated.  For example, it is easier to add derivative’s processing to one platform rather than many platforms,” he noted.

A recent report from Celent has identified a number of market trends that are driving platform consolidation in the managed solutions space. These include:

  • Convergence in products and services between bank-brokers and large online brokers targeting the mass affluent;
  • Regional banks building out their wealth capabilities to target existing clients and provide a “local touch”;
  • Growing consensus around lowering investment minimums for all managed accounts, including UMAs.

Regional Banks Building Wealth Capabilities

Since 2012, regional banks started to increase spending on their wealth management offerings in an attempt to increase their value proposition when selling against firms with national name recognition. Mass affluent customer segments are an inviting target and have drawn increased budgets to leverage web-based products that can deliver services at lower cost without direct advisor involvement.

To take advantage of breakaway brokers escaping the wirehouses, regional banks have been adding more managed solutions, such as UMAs, that also give them more options to service the higher end of the market, the report said. (See FundFire: Bank of Hawaii Launches $2B UMA Program)

However, buying simple rebalance technology is not the same as a UMA, observed Paul Ahern, president and founding Principal of Winslow Capital Group, LLC.  Implementing a UMA program requires a total rethinking of a bank’s business model, technology infrastructure and internal processes.  This is why a consolidated wealth management system is so important.  Regional banks need to coordinate their process instead of managing a hodgepodge of systems, Ahern stressed.

Once a UMA platform is implemented, consolidation soon follows, since most UMA vendors have expanded support for managing formerly discrete products within sleeves. Clients can migrate from MFW to single sleeve SMA’s to a full-blown, multiple sleeve UMA all within the same account, without re-papering. This is a major benefit of platform consolidation.

Convergence in Products and Services

Larger online brokers and full-service wealth managers are starting to compete in the same markets, Celent notes. The steady revenue of fee-based products is attracting more online brokers, while the low-profit, high-volume mass affluent customers are being targeted by advisor-led wealth managers. Cross-selling opportunities will be realized across accounts and service models.

As noted in the Celent report:

There has been a particular emphasis on retirement (both products and tools/services), and on fee-based managed account services. On the other end of the spectrum, banks are developing their online brokerage tools and lowering their thresholds for access to managed portfolios.

Fee-based managed accounts are attractive to online brokers for three reasons:wealth management systems

  1. They are usually centrally managed, which frees up advisors from investment management duties so they can focus on clients’ broader financial pictures;
  2. They are a scalable solution that also offers opportunities for customization to meet specific client needs;
  3. They provide a recurring revenue stream that advisors can leverage to grow their business faster than commission-based.

Online brokers have been gaining traction with fee-based accounts. The Fidelity Institutional division of Fidelity Investments reached $100 billion in managed account assets last October. Fidelity competitor TD Ameritrade recently reported that their fee-based assets increased by 17% over 2013 to $143 billion. Fee-based now makes up over 21% of TD Ameritrade’s total client assets.  We should expect other online brokers to follow suit and try to expand their asset base into managed accounts.

At the same time, banks have been moving into the turf of their online competitors. According to a report by Aite Group, 35% of the top 50 US banks offer stand-alone, self-directed brokerage platforms. This number is expected to grow significantly as banks look for tech-savvy Millennials to refill their deposit base as Baby Boomers continue cashing out.

Lower Investment Minimums

As platform consolidation drives down costs and increases scalability, it allows firms to support smaller accounts than was previously possible when operational resources were spread across multiple platforms.

In my article, Why Haven’t Advisors Embraced Unified Managed Accounts?, the president of a major wealth management systems provider noted that, “he has seen a number of cases where lowering investment minimums increased the flow of assets into his client’s UMA programs.”wealth management systems

Platform consolidation most often involves a UMA chassis becoming the default platform that supports all others. Therefore, lowering the minimum investment is a logical step in the transformation of UMA’s from a discrete program targeting only high net-worth investors to one that can be a vehicle to support all clients.

This trend was predicted back in 2011 by Celent, although the decrease was at a much slower pace than expected. Their recent survey did report a more widespread adoption of managed accounts among clients with under US$ 250,000 in investable assets. This could be partially due to “the entry of large discount brokers into the model portfolio and fee-based space [that] has driven other wealth managers to lower their investment minimums.”

Lower Overhead

Another driver of consolidating multiple platforms is the reduction of fixed overhead costs. Maintenance for aging system can increase greatly the cost of managing assets over time. Platform consolidation onto new technology can both eliminate older solutions and allow support resources to be reallocated to improve client service.

The complexity is partly technological, since all asset managers now maintain an increasingly diverse set of systems and functions, juggling software for proposal generation, research, portfolio accounting, trade order management, performance measurement, operations and business process management, client servicing and compliance.

The merging of technology and services continues at a breakneck pace. From drones delivering packages to smartphones delivering GPS-based advertising, consolidation is occurring across disparate industries and providing new ways to deliver value to customers. It should be only natural for wealth management systems to continue to follow suit. Who knows where it will lead us?

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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