Less than 10% of separately managed accounts are customized for investment and other restrictions, while at the same time less than 10% of SMAs undergo transactions for tax efficiency, according to Neil Bathon, president of Financial Research Corp. Customization and control over taxes are two of the primary reasons advisors give when selling the investments. "[SMAs'] success is largely about sizzle," he said.
One official at a very large and long-time manager in SMAs said she disagrees with Bathon's findings. She added that the firm tracks customized accounts and her figures are much higher. In addition, she said an account may have a lot of restrictions that never get invoked but that doesn't mean they were ignored. Bathon added that asset managers are losing clout in the new SMA world because the distributor is increasingly controlling the brand as they move into unified managed account and multiple discipline programs that package investments. Money managers in these programs do not have as large a role in educating advisors and differentiating their investment strategies. Bathon added that SMAs continue to face huge operational challenges, but investors won't be forgiving when they learn their firms didn't offer unified managed accounts and other programs because of technology limitations. "If investors find out you're not doing this [because of technology] they might not be so happy," he said.