Unified managed accounts, or UMAs, are professionally managed private investment accounts that are typically rebalanced at frequent intervals and embrace every investment vehicle, such as mutual funds, stocks, exchange traded funds and other instruments, in a single pot of money.

Although it is more widely recognised and used in the US, the UMA business model is gaining hold in the UK market but investment firms, advisors, banks and fund platform providers need to take a number of steps to make this investment model work effectively, SEI said in a report entitled, “Transforming to a Models-Based Independent Wealth Advisor”.

“Clearly, the transformation to a models-based offering through a unified managed account structure is not one to be taken lightly. The benefits to all three entities – client, advisor and firm – are substantial, but so are the required commitments,” the report said.

SEI Private Banking, part of the US-based financial services group, SEI, has been producing a series of papers on the investment industry, such as examining the role of independent wealth advisors.

Under UMAs, a fixed number of investment models are constructed by a team of investment specialists; once a client has been profiled and interviewed by an advisor, the client is then put into the investment model that is considered most suitable to his or her needs.

To make unified managed accounts work effectively, SEI Private Banking said a number of steps should be taken:

A firm’s existing book of business must be split into segments with a plan to covert each one into a models-based process linked to the segment’s characteristics, such as investment goals, size, type of client and type of products and services consumed.

A company must plan for “orphan clients” – clients who, for whatever reason, do not want to be put into a UMA.

Firms may have to redefine the role of financial advisors and portfolio managers, as these roles will change considerably due to a more centralised investment process.

Among other steps to take, firms should adopt a “centralised investment approach built around the firm’s best thinking” on issues such as asset allocation, manager selection and guidelines on how to put clients into the most suitable investments.

Platform providers, meanwhile, should ensure that accounts are designed to be closely based around the needs and goals of a client, being sensitive to issues such as whether a client wants to screen investments for issues like social responsibility.