Asset management professionals and the firms that pay them have separately managed accounts (SMAs) on the brain, and for good reason.

The tax-friendly instrument is benefiting from an array of innovative technology advancements and cross-firm business arrangements that are opening the playing field to a wider range of financial institutions than ever before.

Bank of New York and Metavante are among the firms looking to get in. They’ve formed an alliance that brings mid-size financial institutions and money managers together in an attempt to wrest control of the managed accounts world from an exclusive club of five wirehouses that dominate the busiess.

The Bank of New York-Metavante liaison allows trust companies to select investment advisors for their own clients from a list of money managers who provide investment management services for each individual investor in a separate account. Bank of New York facilitates the process and provides execution, clearing and custody services for the investments. Through a proprietary interface, data is fed to the Metavante trust accounting system, which provides trust and fiduciary accounting services for all investments held by the client.

"This allows our clients to compete with the large wealth managers," said Doug Smith, VP and general manager of Metavante’s wealth management division.

Smith says many of Metavante’s clients want in on the lucrative managed accounts game, but it’s still too expensive for most financial institutions to do it on their own since the upfront costs can be hefty.

Smaller players such as Raleigh-based Citizens Bank and Trust, which used the program to create an offering called Paramount Trust Choice, can expand upon their own relationships with wealthier clients by leveraging BONY’s extensive reach in the money management world and Metavante’s technology.

"We can expand our own services across different markets and go downmarket as well," said Rich Shearer, SVP with Bank of New York.

Bank of New York is pushing aggressively in offering SMA services to mid- size trust firms, including its purchase of third-party provider Lockwood Financial last year and its alliance with Metavante.

"Bank of New York has gone out and done due diligence on money managers, so it can produce a turnkey managed account platform they can sell to brokerage firms and banks," said Pam Brewster, an analyst at Celent. Lockwood is among a handful of technology firms, including Brinker Capital, London Pacific Advisors, EnvestNetPMC, AdvisorPort, Separate Account Solutions and Oberon Technology, rolling out products and giving new entrants like Citizens an opportunity to tap the SMA market.

These firms are developing solutions that provide an alternative to the small handful of wirehouses – Salomon Smith Barney, Merrill Lynch, Morgan Stanley, Prudential and UBS PaineWebber – that have dominated the scene because of their first-mover advantage, managing to control about 70% of the marketplace.


Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.