According to Horn AdvisorPort was ahead of the curve, and in 1999 they already had a management team with experience in fund-of-fund vehicles and hedge funds. "We knew how to deal with them in portfolios in terms of how to generate the performance, how to merge the performance with traditional managed accounts, and how to deal in terms of IPS inclusion. It evolved rapidly, and we launched in April 2000 on the Web. We didn't use the acronym UMA, but we clearly understood it."
A true pioneer in the field, Horn's experience spans an enviable family office practice, and the eventual formation of Persimmon Capital Management, which he still oversees. His average account size is around $10 million. "Persimmon was the blueprint that became AdvisorPort," says Horn. "We aren't just ops people, or technologists, or spin-offs from a TAMP. We are a combination of practitioners, scale operations people and money management experience." Horn says that because he and his team have been in the trenches, they know first-hand what the advisor/consultant (and client) needs and now have "many successful independents" using the platform.
Horn uses the term "middleware" to explain what he says sets the company apart from the crowd: "Most of our competitors have built their platform as a user interface or Web site linked directly to a portfolio accounting engine. We've built out an entire robust middleware layer of data warehouse, data hub, billing engine, reporting engine and data verification tools [which allows management by exception instead of management by review]. That entire middleware is what sets us apart in the industry. As our portfolio accounting engine, tax lot accounting and performance measurement, we use CheckFree APL for large scale processing-it's a great engine. For more flexibility we extract data out of APL and put it in the middle layer, and that's where we transform the data and standardize the data to do whatever we need to with it."
He goes on to explain, "The misnomer, though, in UMA is that everything has to be in one account, and that's impossible because we have clients with multiple registrations, and IRA, trusts, joint assets, irrevocable trusts and so on. If the advisor needs to have a comprehensive asset allocation across multiple pockets, or registrations, you can't do that in one single account. But you can do it with the proper infrastructure in that you can take multiple accounts and roll them into a view that allows an advisor to look across an entire reporting group."
The PFPC Managed Account Services platform is open on the front and back end, and is linked with 11 custodian platforms. "The technology finally allows us to do this efficiently," says Horn.
Advisor Reaction
PFPC's users are gaining access now as a result of their signing on with independent broker dealers. "The RIA response rate is somewhat slower because the technology trust factor is critical. Many advisors are used to 'touching' the data and having their own systems in the back office," says Horn.
Lincoln's Dorfman agrees, and has a realistic outlook. "Adoption is usually challenging in the beginning-individuals are hesitant to embrace change, but as they take the time to become more familiar with the technology they will understand the value it offers. There is a learning curve, and we are going through the educational process now with our planners. The activity is high, new plans being developed, many utilizing the platform, and high numbers of people are logging on to the account aggregation services."
Now that the UMA race is on, how long will it take for other broker-dealers and third-party providers to follow suit and either build or buy platforms to serve the masses? More importantly, how will advisors respond to them?
According to Scott MacKillop, a separate accounts expert and the president and co-founder of Evergreen, Colo.-based Trivium Consulting, most financial services firms will be offering UMA-type capabilities. But he believes that advisors will take their time warming up to them.
"Today, for example, SMAs are everywhere," says MacKillop, "but only about 15% to 20% of advisors use them. Similarly, multiple-style portfolios are widely available but they are not used by most advisors, and I expect to see the same pattern with UMAs."