Taxes

Unified Managed Account UMA Definition and Investment Types

Unified Managed Account UMA Definition and Investment Types

Unified Managed Account (UMA): Definition and Investment Types

What Is a Unified Managed Account?

A unified managed account (UMA) is a professionally managed private investment account that includes multiple types of investments in a single account. Investments may include mutual funds, stocks, bonds, and exchange-traded funds. Unified managed accounts are often rebalanced on a specified schedule.

Key Takeaways

  • A unified managed account (UMA) is a privately-managed investment account that can include various investments such as mutual funds, stocks, and bonds.
  • A UMA is typically rebalanced on a regular schedule to ensure the correct balance of investments.
  • It is favored by high net worth investors who want a broader range of investments than what is offered by a separately managed account.
  • UMA providers collaborate with investors to design an integrated portfolio that includes multiple investments, provides support for tax planning, and creates an effective rebalancing schedule.

Understanding Unified Managed Account (UMA)

The unified managed account (UMA) is one of the options available to high net worth investors for managing their assets. It is an evolution of the separately managed account, which is also a professionally managed account that is rebalanced regularly. However, separately managed accounts do not typically pool multiple investments with varying objectives. They are high net worth investment alternatives usually offered by an investment manager who focuses on a targeted strategy managed separately for each investor. If an investor wants to invest across multiple strategies, they would likely need to open multiple separately managed accounts.

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A unified managed account is often a better alternative for an investor seeking to combine multiple investments. The UMA eliminates the need for multiple accounts and can combine all of the investor’s assets into one account.

UMA investors pay annual management fees based on the total assets under management (AUM); fees decrease as the AUM increases.

Investing Through a Unified Managed Account

The same banks and brokerage firms that offer separately managed accounts also typically offer unified managed accounts. Their offerings have expanded to include registered investment advisors and private wealth managers. Technology has supported their expansion. A unified managed account provider has a greater overall fiduciary responsibility as they oversee multiple investments, including stock positions, employee stock option plans, and third-party separate account management.

UMA providers work with high net worth investors to integrate all of their assets. Once the assets are aggregated, a UMA provider will work with the client in several ways. The provider can examine the total portfolio for a comprehensive plan, including an overlay strategy that manages the portfolio from a targeted asset allocation diversification approach. UMA providers also offer investors new options with affiliated companies and products for long-term investments. They analyze the portfolio to align it with modern portfolio theory and optimize risk-return. UMA providers also streamline reporting and comprehensive tax planning for high net worth clients. They work with clients to determine a rebalancing schedule that aligns with their investing strategy.

UMA standards and fees vary by provider, and investors typically sign an agreement that outlines the management of the account, its fees, and its allowable investments and structuring. UMA investors pay annual management fees based on total assets under management, which usually decrease with greater assets under management and can range from 1.50% to 3% annually.

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UMA standards and fees vary by provider, and investors typically sign an agreement that outlines the management of the account, its fees, and its allowable investments and structuring. UMA investors pay annual management fees based on total assets under management, which usually decrease with greater assets under management and can range from 1.50% to 3% annually.

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