Overlay manager draws on TAMP roots to capture additional clients. Placemark Investments is out to make a bigger name for itself as a third-party platform provider. The Dallas-based firm has just launched “Select,” a new, all-unified managed account (UMA) turnkey asset-management program (TAMP) that could position it to compete head-on with other open-architecture separate account providers to small- and middle-market banks, local brokerages and wealth-management boutiques.

“Many companies want to offer [UMAs] to provide better service to their clients,” says Placemark CEO Lee Chertavian. But some smaller distributors find UMAs onerous from an operations standpoint, leaving the field to the wirehouses and some of the regional broker-dealers. “With Select, we can offer smaller companies a full-feature UMA program, including advanced tax management and other sophisticated features advisors expect in a robust UMA offering.”

Vox collectari

Placemark says Select is its answer to “the growing volume of inbound requests” it gets from investment distributors that want to offer UMAs but lack the wherewithal to build their own programs. Based on that feedback, Chertavian figures that small banks, brokerages and registered investment advisors (RIAs) will respond most readily to Select – though probably for different reasons. Banks and brokerages will look to the program as a way to access an investment product that’s usually associated with wirehouses and big regional names.

One early taker, Searcy, Ark.-based First Security Bancorp, seems to fall into that camp. “With Placemark Select, we can offer an industry-leading UMA program without making significant investments in operations and infrastructure typically required to support such a program,” says Lee Mackey, head of the bank’s private-client group.

RIAs meanwhile, are likely to respond to Placemark’s new program for its tax capabilities. “They already see themselves as wealth managers,” says Chertavian. “For RIAs it’s more about the tax angle than anything else.”

No-brainer

UMAs are supposed to be getting traction in the private-client space because they provide fairly broad asset allocation and tax oversight with lower investment hurdles than similarly diversified portfolios of stand-alone separately managed accounts (SMAs). They also offer comprehensive reports to help investors make better sense of their holdings and, in theory at least, make the advisor’s job easier by streamlining the consulting process.

Delivering the keynote speech at an SMA conference in Boston last week, Tiburon Strategic Advisors’ managing principal Chip Roame called UMAs “an obvious, consumer-oriented” way to make SMAs more popular among well-heeled investors. Right now, he noted, SMAs’ share of the investment-product marketplace is less than one fifteenth that of mutual finds. Although mutual funds will continue to dominate the retail landscape, UMAs are poised to become an important investment vehicle for affluent baby boomers looking to make the most of their retirement nest eggs. “It’s really a no-brainer,” said Roame. “UMAs are what SMAs were supposed to be in the first place.”

That said, it’s hard to gauge how much uptake UMAs are actually getting. They’ve only been around for two or three years, and sponsors tend to lump UMA results in with their broader SMA numbers.

Just a few

Few names in the investment industry are more closely associated with UMAs than Placemark, which is best known as an overlay manager of other sponsors’ UMA programs. In that capacity it aligns trading, manages cash flow and attempts to enhance the overall tax efficiency of investment portfolios that incorporate separate accounts, mutual funds, exchange-traded funds (ETFs) and other products in individually registered custodial accounts.

Placemark won’t say how much it manages, but it bills itself as “the leading overlay manager to financial [service] companies offering UMAs” and says it provides more than 140 strategies from over 100 management firms. “This expanding manager list gives Placemark’s sponsors the industry’s broadest selection when creating UMA portfolios for their firms, reducing the time and expense associated with developing a custom UMA program,” the firm says in a recent press release. “New sponsors looking to develop custom UMA programs using their preferred managers usually find that many of those managers are already working with Placemark.” Placemark is overlay manager to the UMA platforms of PricewaterhouseCoopers, Piper Jaffray and RBC Dain Rauscher, both of Minneapolis, Philadelphia-based Janney Montgomery Scott, and Canada’s BMO Nesbitt Burns.

Placemark’s main competitor in the overly space is Seattle-based Parametric Portfolio Associates, an index manager owned by Eaton Vance. Other players include IXIS Asset Management Advisors’ Oakland, Calif.-based Managed Portfolio Advisors unit and, in an advisor-as-manager version, Cambridge, Mass.-based overlay software vendor Smartleaf.

Mix and match

In point of fact though, Placemark began life in the early 2000s as a third-party platform provider. “We got our start in a TAMP-type model, and still have those clients,” says Chertavian. “But in 2002, 2003 we started to get attention as an overlay manager.”

Placemark’s original offering, “TOTAL” – for “tax-optimized total asset link” – is a third-party investment platform and “optimization engine” that determines the tax impact of equity transactions within individual SMAs, across SMA portfolios and on extra-SMA holdings such as real estate. Placemark’s clients in that line include Houston-based NEXT Financial Group, Cleveland-based McDonald Investments and ProEquities of Birmingham, Ala.

The new program, Selects, incorporates “some changes we wanted to make, mainly around oversight and reporting” with “capabilities we have been using since early 2002,” says Chertavian.

As overlay manager of a sponsor’s UMA program, Placemark typically stays out of manager research, performance reporting and product design. With Select, however, it covers the bases as sponsor by assuming the overlay and reporting functions and by drawing on outside providers to fill in the gaps. Denver-based Prima Capital handles manager research, monitoring and due diligence. Firms can choose between Schwab Institutional and Pershing Advisor Solutions for trading and custody.

With investment minimums starting at $100,000, Select offers three pre-packaged strategy blends from 19 managers. Advisors can shape those pre-defined portfolios to suit their clients’ needs by adding mutual funds and ETFs as need be. For that matter, they can forgo the package deals altogether and use the program as a palette to create fully bespoke UMAs. –FWR

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