Scott Egner

Manager of Managed Account Solutions, TD AMERITRADE Institutional

Why are UMAs becoming increasingly popular with advisors and their clients?

Advisors today continue to look for ways to increase the efficiency of their practice. UMAs allow them to combine different types of investment products into a single registration. This reduces the number of

accounts per household, providing advisors a more holistic view of their clients' total holdings. Depending on the number of registrations per household, we can significantly

reduce the number of account statements that are required to run a household investment portfolio. Advisors' clients will get a single account statement per registration, which simplifies things, particularly if it's a taxable account. For example, clients will get a single 1099 at year-end as opposed to having to run multiple forms.

How can UMAs help advisors and their clients

with retirement income planning?

UMAs are well suited to retirement planning because they allow clients to have a single account with many different types of assets, including those designed for either growth or income. As the baby boomers approach retirement, advisors can use the UMA platform to help clients build assets in the accumulation phase, then easily shift to a different asset mix during the distribution phase. In effect, advisors can use a UMA to help investors create their own personal pension plan, repositioning assets from aggressive to conservative over a gradual time period. So I think we will see a major trend with advisors using UMAs to help clients plan for retirement income.

How can UMAs offer advisors more investment

choice and flexibility?

Many UMA platforms in the marketplace today offer only a small number of active managers on their platform. With the recent launch of our Unified Managed Account Exchange (UMAX), advisors using the TD AMERITRADE platform now have the flexibility to combine more than 200 separate account managed strategies, along with all of the individual securities, exchange-traded funds, exchange-traded notes and closed-end funds already available to them. For advisors who want to conduct their own due diligence of active managers, they will have a lot more control over what goes into their clients' UMA. We can also accommodate the needs of advisors who prefer to leave the manager selection to us. Not all advisors are interested in researching active managers, so our research provider can handle manager selection for you if you prefer to outsource that function for part or all of your client portfolios.

Caroline Austin

Senior Vice President, First Southwest Co., and Chief Investment Officer, FSW Advisory Services

What type of advisor does a UMA appeal to?

We've seen a lot of interest in UMAs from advisors who want to manage part of the portfolio and outsource management of other parts of the portfolio. With a UMA, they have total control over the portfolio and can blend solutions with their own management expertise in a single account. In addition, because our UMA platform can be very technology intensive, we find that it often appeals to advisors who are willing to embrace technology solutions as a way to gain greater efficiency-and profitability-in their practice.

How can UMAs help advisors build more tax-efficient

portfolios for clients?

Advisors can't always get tax sensitivity from a separately managed account manager and it's unavailable at the individual shareholder level in a mutual fund. However, advisors can get tax sensitivity from a UMA manager. With our UMA platform, you're simply buying

the manager's best ideas and will have access to the manager's investment model. As the advisor, you implement the model yourself, taking your clients' individual tax needs into consideration.

For example, you can implement tax-loss harvesting for clients with large gains in other parts of their portfolio.

Why has it been more of a challenge to integrate

fixed income into UMAs?

There are some structural issues within the fixed-income marketplace that make it hard to automate trading. For example, within the world of municipal bonds, you have more than 50,000 issuers. Some of those individual bond issues can be quite small, so there often isn't enough liquidity to automate your trades. Our UMA platform allows advisors to see their fixed-income positions and will alert them when they may need to rebalance a bond position. However, advisors will need to place each fixed-income trade individually. We hope to see improvements in fixed-income integration on our UMA platform over time as fixed-income technology continues to improve.

What's next on the horizon for UMAs?

I think we're going to see increased demand from advisors to be their own overlay managers within a UMA platform, rather than using a third party. Our platform already allows this flexibility, but I think it's probably unique in this respect. I also expect that more advisors may become interested in moving from a rules-based analysis to an optimization-based analysis, which will likely impact the way UMAs operate. Finally, I think that many UMA providers will continue to explore new ways to put risk management strategies around a total portfolio within the context of UMAs.

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