A report by Celent looks at how new and not-so-new parts of the US wealth management market are in a battle for business.

The line between relatively young “robo”-driven investment models and more established unified managed account platforms is becoming blurred, with the latter seen as too expensive for many clients and requiring a technology shakeup, according to a report by Celent, the consultancy. 

A report entitled Robo UMA – Automated advice and the battle for the affluent investor, examines development of digital UMA platforms and how they can, or should, serve affluent clients. 

With most business-to-business robo advisor models, they customize investor portfolios by asset allocation, putting clients into a handful of allocation “buckets”, from conservative to aggressive. On the other hand, a UMA is personalized, but expensive. These tend to be run on more old-fashioned technology, with more manual work and paperwork, making it hard for UMAs to work well in a mass market. (Unified managed accounts are professionally managed private investment accounts that are regularly rebalanced regularly and can cover every investment vehicle in an investor's portfolio, all in a single account. UMAs, unlike robo-advisors, have remained the preserve of the affluent client, who must put up at least $100,000 (more typically, $500,000) for access.)

However, technology today means that a tax-efficient portfolio is no longer just enjoyed by wealthy investors, and robo advisors are trying to gate-crash the party, putting some providers under competitive pressure, the report, written by William Trout, says. 

“Thematic convergence is playing out on a strategic level, as nimble, specialized firms focused on rebalancing and portfolio risk flex their digital muscles. Having underestimated the degree to which these upstarts could morph and even repurpose themselves within a digital milieu, turnkey key asset management providers (TAMPs) like Vestmark, FolioDynamix, and Envestnet face a strategic reckoning,” the report continues.

“Partnerships and acquisitions are on the table as digital disruptors capture the zeitgeist, and increasingly, market share. The way FolioDynamix describes its new robo advisor partner AdvisorEngine (“The wealth management technology platform built on Robo Advisor DNA”) speaks to the industry’s need for new blood. The extent to which such transfusions will benefit incumbents, or forestall what appears to be inevitable disruption within the business, remains uncertain. Much will depend on how quickly the disruptors can roll out enterprise level solutions aligning back end support to sophisticated portfolio management services,” the report continues.