Wirehouse advisors are increasingly shunning separate account programs in favor of other types of managed accounts that give them more flexibility to control their clients’ assets, according to a new report from Cerulli Associates. 

 

The Boston-based consulting firm  found that separate account programs have shrunk at an annualized rate of over 16% over the last two and a half years. Nearly every other type of managed account program grew over the same period. In a separate account, a client owns individual securities rather than other assets, such as mutual funds and exchange-traded funds (ETFs). The securities are traded by a professional money manager.

 

Bing Waldert, a director at Cerulli, says advisors are increasingly seeing separate accounts as an inflexible vehicle that doesn’t allow them to move in and out of the market quickly enough. He says advisors are seeking out programs that allow them to invest in a range of asset classes, such as ETFs and cash. “Everyone did poorly in the fourth quarter of last year and the first quarter of this year, and a lot of advisors took it very personally,” says Waldert. “They want to accept more responsibility for their clients’ portfolios.”

 

Waldert predicts greater flows to unified managed account (UMA) programs, which currently only make up 4% of wirehouse managed account assets. “The new generation of UMAs give advisors the chance to be more tactical,” he says. UMAs can hold a range of different investments, including stocks and mutual funds.

 

Overall, wirehouse advisors use more separate accounts than advisors in other channels. Wirehouses control the largest share of all managed account assets, representing nearly $875 billion, or 58% of the industry, at the end of the second quarter. 

 

Cerulli also found that wirehouse advisors are relying less on their own firm’s research and are looking for a broader range of research sources, including academic research