Wirehouse advisors are increasingly shunning separate account programs in which securities are directly held in favor of other types of managed accounts that use mutual funds, exchange-traded funds, annuities or other professionally managed securities because they find the latter gives them more flexibility to control their clients' assets, according to a new report from Cerulli Associates.

The consulting firm found that separate account programs have shrunk at an annualized rate of over 16% over the last 2-1/2 years. Nearly every other type of managed account program grew over the same period. The securities are traded by a professional money manager.

Bing Waldert, a director at Cerulli, said advisers are increasingly seeing separate accounts as inflexible vehicles that don't allow them to move in and out of the market quickly enough. He said advisers 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 advisers took it very personally," Waldert said. "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 advisers the chance to be more tactical," he says. UMAs can hold a range of different investments, including stocks and mutual funds. Overall, wirehouse advisers use more separate accounts than advisers 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.


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