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Account Consolidation

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Bank of America has launched a unified managed account service, called Portfolio Strategies Managed Account, that combines a separately managed accounts platform and managed mutual fund wrap account platform into one entity. “Our clients wanted simplicity but they didn’t want to sacrifice sophistication in terms of investment strategies to get that.” The new platform is probably going to be the “fastest growing fee-based platform we have in Premier Banking and Investments,” in 2007, says Boston-based Dan McNamara, investment products group executive for the bank. “It’s probably going to be bigger than we had originally anticipated.”

The big bank’s fee-based advisory business has grown “significantly” and there is a heightened awareness and acceptance of fee-based business within the organization, McNamara explains. Client demographics have changed and, because of their higher net worth, clients can buy multiple investment products. This new offering “simplifies the delivery of the solution to the client. Now we have clients that had three, four, or five accounts with us [that are] down to one. It’s a much better experience.” A client that had three different separate account managers for, say, large cap, small cap, and international equities, and a couple of mutual fund wrap accounts can consolidate them into one Portfolio Strategies Managed Account.

Targeted to Banc of America Investment Services’ affluent clients–with $250,000 to $3 million to invest, the Portfolio Strategies platform’s average account size since its November launch is about $500,000, and that number is higher than the Banc’s average managed account or mutual fund wrap account size. Historically, the Banc’s advisors could offer clients a mutual fund wrap program, Fund Strategies, for accounts with a minimum of $50,000 to invest. Fund Strategies’ average account size is about $140,000. Next up the wealth ladder was the separate accounts program, Consulting Services Selects, with investment minimums of $100,000 to $250,000.

Why would a client want to go with a unified account made up of separately managed accounts and mutual funds? If taxes are a big issue for them, then separate accounts may be more “tax-friendly,” McNamara explains. At the $250,000 level in an all-equity portfolio, one of the asset allocation models would allocate 66% to large cap, and that could be put into a separate account, while the smaller allocations (not large enough for separate accounts) to mid cap, small cap, and international could be rounded out with mutual funds.

The new UMA Portfolio Strategies platform will offer eight core strategies and 72 variations overall, and McNamara anticipates that, over time, 75% of the separate account managers that are available through the pure separate accounts platform will be available through the unified platform. Depending on the size of the account, fees will range from a 2% maximum stated fee down to 81 bps.