Robo UMA: Automated Advice and the Battle for the Affluent Investor

by William Trout, March 30, 2017
Industry Trends
North America

Abstract

Today, the line between robo advice and managed account technology is blurring.

Celent has released a new report titled Robo UMA: Automated Advice and the Battle for the Affluent Investor. The report was written by William Trout, a Senior Analyst with Celent’s Wealth Management practice.

A shared focus on tax management represents a starting point for greater integration and the construction of a digital platform that is fully relevant to the investor The diffusion of discrete operational tech (centering on portfolio risk; rebalancing; and trading/accounting functions) through a digital lens that has the potential to disrupt the turnkey asset management provide (TAMP) business model. Account performance is directly influenced by the quality of the rebalancing process, and reflected in terms of dispersion, tax savings/losses, and the management of cash positions.

“Since the 2000s, the development of the UMA has been iterative, not innovation driven. TAMPs have solidified their market position, but at a long-term competitive cost," commented Trout.

“TAMPs like Vestmark, FolioDynamix, and Envestnet face a strategic reckoning. Partnerships and acquisitions are on the table as digital disruptors capture the zeitgeist, and increasingly, market share,” he added.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

2

 

New Kid on the Block

2

 

Robo, Meet UMA

2

 

Bridging Two Worlds

3

Background and Drivers

4

 

Bottom Up Vs. Top Down

4

 

Technology Boneyard

4

 

Tax Management

5

Digital UMA

7

 

A Defining Feature

7

The TAMPs

9

 

Rebalancing as a Springboard

10

 

Does Sleeve-Level Accounting Still Matter?

11

Platform Innovation

13

 

Fractional Shares

13

 

Direct Indexing

13

Looking Ahead

14

Leveraging Celent’s Expertise

15

 

Support for Financial Institutions

15

 

Support for Vendors

15

Related Celent Research

16

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