What Is a Unified Managed Account (UMA)?

When you hire an investment management firm, you’ll likely have various accounts to choose from. A common choice is a unified managed account (UMA), a professionally managed portfolio that holds a wide range of securities. This arrangement aims to create a diversified portfolio that aligns with your goals and target asset allocation.

In this article, we’ll explain how UMAs work and their benefits and disadvantages. Additionally, we’ll outline the types of clients that should consider opening an account. You’ll also learn how much they typically cost and the prominent advisory firms that offer them.

How a Unified Managed Account (UMA) Works

A unified managed account (UMA) is a professionally managed model account for high-net-worth investors. It houses a wide variety of investments under one pre-selected model. Before investing, you’ll select the model based on your goals, risk tolerance, and time horizon. Because professionals run these accounts, they require you to authorize discretionary authority to a firm.

UMAs include a wide range of investments in one account. This helps achieve a level of diversification that matches an investor’s goals. In general, a UMA may include a combination of the following:

• Stocks
• Bonds
• Mutual funds
• Exchange-traded funds (ETFs)
• Separately managed accounts (SMAs)

As mentioned, UMAs are professionally managed and offered in a discretionary capacity. Here, you’ll pay an advisory fee to cover the management costs associated with running the account. They allow investors the opportunity to house a wide array of investments under one account, rather than requiring one to manage multiple for the sake of diversifying.

UMA vs. SMA

Separately managed accounts (SMAs) are often used in the same sentence as UMAs; however, they are much different. SMAs are also professionally managed accounts that provide a model portfolio for investors, but they generally focus on a specific investing strategy. This typically involves investing exclusively in individual securities, such as stocks or bonds, which fit that singular strategy.

On the other hand, a UMA may combine multiple strategies and investment types under one account. This allows a high-net-worth investor to reap the benefits of several different methods in a more streamlined fashion. In return, they pay one advisory fee and only need to maintain that account, rather than several.

Professionals may mention UMAs and SMAs together because the former often includes the latter within it. In other words, a UMA may house various SMAs within it. However, it’s important to note that the investor only needs to maintain one account, not several.

Pros and Cons of UMAs

UMAs bring several benefits to investors and advisors alike, but perhaps the most important is that they simplify the arrangement between each party. Investing in a UMA eliminates the need for an investor to maintain several different accounts, approve trades, or pay additional fees. On the advisor side, it helps them communicate strategies and progress for the one account, rather than several.

However, while UMAs are advantageous to investors, they aren’t beneficial for everybody. First, they often come with high fees and account minimums, which narrow the number of people they’re available to. Additionally, investing in this type of account requires you to hand over significant control to your advisors, which may not necessarily be what you want.

Pros

• Allows you to invest in several different types of assets within one account.
• Eliminates the need to maintain several accounts at once.
• Simplifies the relationship and conversations with your advisor because you’re only working through one account.

Cons

• High account minimums may prevent you from being able to enroll.
• Fees, ranging from 1% to 1.5% of assets under management (AUM), may price you out of opening an account.
• May require you to hand over more control than you’d like to your advisor.

Who Should Consider a UMA

If you can meet the account minimum to open a UMA, they can be highly beneficial. However, they aren’t for every type of investor. In general, these types of accounts are for those who want a streamlined, customizable investing experience. This differs from one who wants a more hands-on approach, where they manage their accounts separately and exercise more control over them.

Additionally, because of the steep account minimums, UMAs are primarily for high-net-worth clients of advisory firms. They’re especially useful for these individuals because it allows them to spread their resources across several different asset classes through one account.

How Much It Costs

The cost to enroll in a UMA depends on the investment management firm you work with. However, you can think of the cost in two different ways – the account minimum and fee structure. The former is what you must invest to be eligible for the service. Meanwhile, the latter is simply what fee, typically a percentage of AUM, you must pay to keep the account open.

In general, the account minimum for a UMA is tailored to high-net-worth individuals. So, what would put you in that category? This also depends heavily on the firm. Raymond James, a prominent company in the advisor space, requires $300,000 to $2 million to open an account. UBS, on the other hand, only wants an initial $100,000 to begin.

Companies That Offer UMAs

UMAs are a fairly common arrangement among large advisor firms. If you have the assets to get started, many large firms will offer the service. Below are eight of the biggest advisor companies that offer a UMA program:

• Edward Jones
• Ameriprise
• Fidelity
• J.P. Morgan
• LPL Financial
• UBS
• Raymond James
• RBC Wealth Management

Frequently Asked Questions

What is an example of a unified managed account?

UMAs are professionally managed accounts that are made of several investments that may be held within SMAs. An example of one of these programs is UBS’s Strategic Wealth Portfolio (SWP), which is a unified account that invests in a combination of equities, fixed-income securities, and ETFs. In a program like this, the exact portfolio setup varies based on your target asset allocation, which a firm determines through your goals, risk tolerance, and time horizon.

How are unified managed accounts different from separately managed accounts?

An SMA is a discretionary account that invests in various securities, such as ETFs, stocks, or bonds, that fit a given strategy. UMAs operate in a similar capacity, but they include several different SMAs under one account. The purpose is to invest in separate portfolios that follow different approaches, allowing an investor to tap into various areas under one roof.

How do I know if a UMA is right for me?

UMAs are mostly beneficial for high-net-worth individuals who want a more streamlined, holistic approach to investing. They make it easier to manage your investments because all of your securities or SMAs are held within one account. However, they’re also discretionary, requiring you to hand over control to a portfolio manager.

If you prefer to be more hands-on or aren’t a high-net-worth investor, a UMA may not be right for you. But if you are comfortable with less control and are able to meet the account requirements, it may be the right move. We recommend you speak with your financial advisor and weigh the benefits and disadvantages as they relate to your long-term goals. This way, you can find the path that matches your preferences.