Are robo-UMAs the next innovation in product design? William Trout, senior analyst with Celent’s Wealth Management practice, examined in a new report the potential to combine the robo model with unified managed accounts as a way to serve affluent clients’ needs.
Customization on most robo platforms is limited to asset allocation across a handful of “buckets,” from conservative to aggressive, the report noted.
UMAs provide more customization, but also cost more. They’re operationally complex and run on legacy architecture, according to Trout.
The consumer-focused robos elevated the importance of consumer experience in investing. Experience, along with lower costs and fee transparency, are defining characteristics of the robo model, but Trout believes future iterations of robo-advisors may feature a fourth characteristic: tax optimization. This is a key area where robo-advisors services and UMAs overlap.
“Today, the line between robo and UMA technology is blurring. Best in class, tax-optimized portfolio management is no longer the patrimony of the high-end advisor,” he wrote.