Assets under management rise to $10.7 trillion as customers seek more personalization

Assets in managed accounts jumped nearly 24% to $10.7 trillion in 2021, according to Cerulli US Managed Accounts Report 2022, which was released on Monday. This includes an array of programs such as Representative as Portfolio Manager (RPM), Unified Managed Accounts (UMA) and Representative as Advisor (RA) programs.

Demand for personalization drove strong growth in managed accounts last year, Cerulli finds.

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While last year’s bubbly markets were a key driver of growth, there is also the long-term trend towards personalization of portfolios. About 56% of managed account sponsors have made this a priority.

Most managed account sponsors plan to offer more customization possibilities for separately managed accounts (SMA) and direct indexing. This allows clients to select or exclude securities from an index.

The survey, which was based on data provided by the top 40 sponsors of asset-managed accounts, shows that 93% of sponsors see direct indexing as a way to reduce the tax bite. For example, a customer may offload some inventory to reap losses. This could certainly be important this year due to the bear market.

Direct indexing can also be a means of attracting a younger clientele. In the Cerulli survey, four of the five types of managed account programs saw an increase in the share of environmental, social and governance (ESG) investments. In other Cerulli’s investigation– which focused on US retail investors – around 44% of households would prefer to invest in a more environmentally or socially responsible way.

For sponsors, the competitive environment has certainly increased over the years. Keeping the best financial advisors has become much more difficult. This is why sponsors need to find ways to differentiate their offerings – and direct indexing appears to be an effective strategy to achieve this.

“Company sponsors realize that discretion is a powerful tool for advisors,” Matt Belnap, associate director of Cerulli, said in a press release. Instead of trying to take it away from underperforming advisors, they instead give their advisors tools to be better portfolio managers.

Tom Tauli is a freelance writer, author and former broker. He is also the author of the book, The tech pro’s guide to personal finance.