For certain investors, a unified managed account (UMA) could help streamline investment management. It is professionally managed, and can hold a variety of different investments. However, you might prefer this option if you have a high net worth and substantial assets. Here’s more UMAs and how they work.
Unified Managed Account Definition
In simple terms, a unified managed account combines several different investments into a single account. For example, a UMA might hold:
- Mutual funds
- Exchange-traded funds (ETFs)
- Individual stocks and stock options
- Separately managed accounts
A separately managed account or SMA holds several investments owned by one investor. This account is managed on behalf of the investor, based on a single asset allocation strategy. For example, inside an SMA you might hold a mix of stocks and bonds. This is similar to the way a mutual fund works, only you aren’t pooling your money with other investors.
The different investments, or sleeves, inside a UMA resembles a house’s structure. For example, the UMA is a roof over various rooms of investments. Consequently, each room, or investment, holds a different purpose.
The SMA typically has a single investment strategy or focus. Howver, a UMA incorporates multiple strategies across multiple individual investment positions.
Investing in a Unified Managed Account
Unified managed accounts can be offered by wealth managers and other financial institutions. For instance, if you want to open one of these accounts, you’d first work with an advisor, wealth manager or portfolio manager to decide which assets you want to hold inside the UMA.
Once those assets are selected, they’re aggregated and collected into the unified managed account. The next step is developing an investment strategy for managing UMA assets. However, this strategy is different for every investor who uses a UMA and is based on their objectives, diversification needs, the timeline for investing, risk tolerance and risk capacity. Meanwhile, money managers also construct unified managed accounts with tax efficiency in mind.
UMAs are rebalanced often to keep the account’s asset allocation on track with your needs and preferences. However, rebalancing is approached in a way that keeps your entire comprehensive financial plan in focus.
Unified Managed Account Advantages
There are several things that might appeal to investors where UMAs are concerned. First and perhaps most importantly, it’s a way to consolidate and streamline asset management.
That’s a good thing if you have a large portfolio that covers a broad range of assets. Instead of going from one account or investment to the next to try and track returns or performance, a UMA makes it easier to compare performance for different holdings side by side. Similarly, it becomes easier to compare how different investment strategies are working for you inside your portfolio and figure out where you need to adjust.
Unified managed accounts can also benefit you if your money manager is managing assets in a way that minimizes both tax efficiency and risk, while still achieving your target returns. It also simplifies year-end tax reporting and accounting, since there’s less paperwork to manage. You only receive a single Form 1099 to report gains across all of your investments. And regular rebalancing ensures that your total portfolio stays aligned with your goals over time.
Who uses a Unified Managed Account?
If you’re wondering whether a UMA is right for you, here a few things to think about.
First, the account minimum required for unified managed account may be higher. For example, you may need $500,000 or $1 million in assets. By comparison, a separately managed account may have minimums closer to $50,000 or $100,000. If you’re not a high net worth investor, you may not need a unified managed account.
Second, it’s important to consider the fees you might pay for a UMA. Every UMA provider is different when it comes to fees. However, it’s typical to pay in the range of 1% to 1.5% annually for account management. Meanwhile, you may be able to minimize fees to a degree if your financial institution charges fees on a sliding scale. That fee may decrease when you have more assets under management.
Third, think about what you’re aiming for with portfolio management. If you have a very broad, diverse portfolio, a UMA could help. If you’d prefer more of a hands-on approach you may lose some control with a unified managed account.
The Bottom Line
A unified managed account can be a good choice for high net worth investors. It can consolidate assets into a single account while maintaining individual investment strategies for those assets. When considering a UMA, pay close attention to the minimum investment required. Also, consider the overall track record of the money manager who would be in charge of your account.
- Consider talking to your financial advisor about the advantages and potential disadvantages of investing through a UMA. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
- A unified managed account is just one tool you can use to create a financial legacy to pass on wealth. An estate plan can include provisions for investment accounts. As a result, it can divide your assets according to your wishes. That extends through your lifetime and beyond.
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