The MDA-type accounts already have evolved through three generations of models:
1999: Pre-defined models with single proprietary managers. These programs lacked any third-party managers, multiple managers or customization capabilities.
2001: Pre-defined models using single third-party managers. These programs used third-party managers, but only one, and were not customizable.
2002: Pre-defined models using multiple third-party managers. These programs now use multiple third-party managers, but are not yet customizable.
The design of this new model should help speed the growth of the entire MDA market. Tiburon estimates $50 billion in annuals sales by 2004, growing to $250 billion by 2007.
Insurance Packaging: As mentioned earlier, the high-net-worth individual may have the option of choosing a fee account with an insurance wrapper. Both insurance and investment companies are developing products which can be wrapped around both SMAs and mutual fund wrap programs.
Unified Managed Accounts (UMAs): According to Roame, the ultimate vehicle should be an "open fee" platform allowing assets to be priced individually. "There is no reason why investors should have to have different accounts for various assets they own." The report suggests that an investor could utilize separate account managers, various mutual funds and individual securities in the same account. Some firms already provide UMAs for their ultra-affluent clients in the private banking arena, with accounts starting at $5 million.
These emerging developments, plus technology and distribution opportunities (including international), bode well for fee business and SMAs over the near term. Tiburon's report also points out that as the independent markets grow and the discount brokers move up-market, the long term possibilities are significant. Says Roame, "It's an exciting time for the fee-accounts industry."