Is that good or bad?

More light is about to shine on the booming separately managed account business, which has emerged as a major growth area for the financial advisory industry.

Separately managed accounts, which heretofore had no high-profile Value Line or Morningstar monitoring service, finally have a popular scorecard. Morningstar, the Chicago-based fund rating service that in the 1980s and 1990s became the bible of the mutual fund industry, is starting to evaluate individual managed accounts.

But is that a good thing? And is the Morningstar star system used for funds going to work with individual accounts?

"I'm really skeptical. I don't expect the comprehensive report detail that is needed to evaluate these services," says Lewis J. Walker, a certified financial planner who uses separate accounts extensively at his firm in Norcross, Ga. "It's my job as an advisor to customize the separately managed account, and I think there may be some advisers who are going to use this service as a short cut and stop doing their job effectively," Walker adds.

He oversees hundreds of millions of dollars in these separately managed accounts, although he will not disclose the exact amount of assets. Walker says he has no intention of using the new Morningstar service.

But one of the pioneers of the managed money movement says Morningstar's entrance into the business is a good thing. "I welcome them (Morningstar). Finding benchmarks can be a messy thing, and maybe they can possibly help," says Len Reinhart, president of The Bank of New York Separate Account Services in Malvern, Pa., with some $7 billion in assets under management.

Reinhart, who spent a quarter of a century in the business, including heading up Shearson Lehman's money management division, says there is no paucity of information on a separate account after it has been set up. "Once you start with such a service, you get more information than you want sometimes," Reinhart says.

But finding information before one selects a separate account service can be difficult, he adds. "For example, each wirehouse can have its own benchmarks. It can be confusing," Reinhart says.

He also concedes it could also be confusing for those buying the Morningstar separate account service. That's because, initially at least, Morningstar will not be able to capture the entire universe. The wirehouses are not cooperating with it, according to a Morningstar official, but many independent providers are and some have signed on for the service.

"We don't think of this as the be all and end all. Still, we think this service will be useful for many financial professionals who are evaluating managers and want a second opinion," says Ryan Tagal, product manager for Morningstar's separate accounts service.

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