BoA Fee-Based Unit Plans Unified Managed Account
July 19, 2004
Bank of America Corp.'s consulting services group is planning to launch a unified managed account platform early next year to enhance its quickly expanding fee-based services program. "From a technology standpoint, the foundation is here for us to build a unified managed account platform," said Dan McNamara, the consulting services group's managing director.
The unified managed account is viewed as the next generation of managed account products. It lets an adviser assemble multiple products, including managed accounts, mutual fund wraps and traditional products such as mutual funds and exchange-traded funds, on one platform. McNamara noted that wealthy clients want a comprehensive set of solutions in a "nice neat package."
"If you look at why mutual fund wrap programs are successful, it is because it is an easy story to tell and implement," he said. "With wrap accounts, you can fulfill an asset allocation strategy with a range of products in one account. With managed accounts, a customer can own the securities, take advantage of the tax situation and customize. [The unified managed account] is the best of both worlds."
A handful of banking companies are offering the innovative products, including Wachovia Corp., Citigroup, KeyCorp.'s McDonald Financial and PNC Financial Services' PFPC Worldwide. Within eight months of starting its platform in December 2002, Wachovia had accumulated $500 million.
Bank of America's consulting services group has grown rapidly since McNamara was hired from Wachovia in September 2001 to start up its fee-based services unit. Since Jan. 1, the unit has seen 44.5% growth in its assets under management, to $12.4 billion. It has $7.1 billion in managed accounts, $3.2 billion in fee-based brokerage services and $1.99 billion in mutual fund wrap accounts.
In March, the unit started offering a multiple-style managed account program called Consulting Services Portfolio Strategies in which multiple managers can oversee a multi-style product within one account. Previously, an investor who wanted four investment styles would have to open four managed accounts. The new product is distributed through more than 1,150 advisers at Banc of America Investment Services. Since March, this platform has accumulated $114 million of assets.
Analysts said the fee-based services business has expanded rapidly in the past three years. The Money Management Institute said assets in the accounts rose 29% last year, to more than half a trillion dollars. Kevin Daniels, a Boston analyst, said Bank of America is expanding its business at a nice pace but still has plenty of opportunities. The company now is focusing on selling fee-based products and services to its own brokerage and private bank customers. "They have to explore other channels to really test this business," Daniels said. Nonetheless, McNamara said Bank of America customers will remain his focus for now. "We certainly have had conversations about other channels, but it is just not a big initiative," McNamara said.
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