A roundtable discussion with leading advisors on the value of MDPs.
Multiple-Discipline Products (MDPs) continue to flourish-their share of SMA asset inflows has tripled since year-end 2000. Boston-based Financial Research Corp. projects MDP sales to represent 25% of all SMA sales, growing to approximately $35 billion by the end of this year and $46 billion in 2004. According to a new study, MDPs will capture 17% of the managed account market by 2004. Pioneered by industry giant Smith Barney/Citigroup and trademarked by them as Multi-Discipline Accounts (MDA) they offer advisors a solution for middle-market clients. Because almost all brokerage firms and many independents are offering some type of proprietary multi-managed account, the acronyms look like alphabet soup: DSP, MSP, MAP, MSA and MMM to name a handful.
Basically, multi-discipline products are model portfolios that incorporate several different style managers into one account. The advisor gets one statement, one performance report, and access to the Overlay Portfolio Manager (OPM), who oversees the asset allocation, rebalancing and monitoring of the portfolio. They are purported to improve advisor efficiency, open middle markets that might not be appropriate for a separate account (clients with $50,000 to $300,000 of investable assets), and reduce risk (more styles), while providing more time for client service as the investment management is outsourced.
That being said, industry sources suggest that advisors with assets of $100 million and more showed very little interest in this platform. FA talked to five successful independent advisors about their thoughts on this burgeoning market. They are:
Thomas A. Muldowney, CFP, CLU, ChFC, MSFS, managing director, Savant Capital Management Inc, Rockford, Ill.
George Strickland, CFP, CPA, CIMC, principal, Financial Synergies Wealth Advisors, Houston, Texas
Wayne von Borstel, CFP, CLU, ChFC, MSFS, von Borstel & Associates, Oregon Trail Financial Services Inc., Portland, Ore.
Lewis J. Walker, CFP, CIMC, CRC, Walker Capital Management Corp., Walker Capital Advisory Services Inc., Norcross, Ga.
John Yetman, principal, Goddard & Yetman Retirement Investment Group, senior vice president-investments/investment officer, Private Client Group, Wachovia Securities, Washington, D.C.
FA: Gentlemen, multiple-discipline products (MDPs) are hailed as being a perfect investment solution for middle-market investors, since many don't meet minimum requirements for a separate account. Would you agree?
Walker: There is no such thing as a "perfect" investment. At the low end, $50,000 up to $150,000, a diversified portfolio of mutual funds may be a better bet. I am more comfortable with MDPs at $250,000 or more.