Unified Household Model Held Back by Industry Jargon

Through technology enhancements, wealth managers can now offer clients family-office level services. One service advancement in particular, the unified managed household (UMH), drives collaboration and transparency while fostering long-term relationships based on trust.

However, to maximize the UMH’s benefits, the wealth management industry needs to bring clarity to the UMH message. Managers, sponsors and advisors must ensure that jargon and other unnecessary complexities do not diminish the model’s potential to make a powerful and positive impact.

Managers, sponsors and advisors must ensure that jargon and other unnecessary complexities do not diminish the model’s potential to make a powerful and positive impact.

To be sure, the UMH's arrival is a significant milestone for the industry, which counted $3.4 trillion in assets under management at year end, according to the Money Management Institute. Prior to recent technological advances, wealth managers did not offer these best-kept secrets because they required manual, labor-intensive procedures.

Now that better technology has changed the status quo, UMHs are gaining better visibility and long-term traction with investors.

However, high-net worth clients need to understand that they are not being sold on an untested, complicated gimmick that should be met with caution. The wealth management industry must remove the shroud of mystery surrounding the UMH, so that investors view the service as a straightforward structure for investment strategies that is simple and scalable through technology.

Properly Defining UMH

One of the first steps to removing this shroud of mystery is agreeing upon a clear definition of the UMH. To date, Aite Group research director Alois Pirker has defined it best: "[UMHs] focus on the totality of a client's assets, which in most cases go across multiple accounts, have multiple registrations, and are managed through multiple financial services firms." The scope of a UMH spans all taxable and non-taxable investment accounts of a given household.

That UMH definition embodies three levels of central, value-added services. The first is a single household proposal system, which allows for advice processes such as asset allocation, tax and income planning to be performed on a household-level. The second is consolidated performance reporting, which allows clients to holistically track their household-level progress in achieving financial planning goals. The third is coordinated investment management, which provides family-office-like financial planning, trading and management in a fashion that was only available to ultra-high-net-worth households in the past.

When the UMH is defined through this framework, it is much easier to grasp the inherent value proposition.

As UMH adoption becomes more prevalent, wealth management firms should consider it part of their dominant approach. Meanwhile, investors and advisors need to know more about the key benefits of the UMH, which are three-fold:

Higher-quality financial advice – A comprehensive UMH-view into all of a client’s accumulated assets, including savings and investment accounts, enables the advisor to provide far more strategic advice.

Long-term wealth preservation – This benefit particularly appeals to high-net-worth and mass-affluent investors who want to extend and preserve their wealth for future generations.

Ease of asset management – UMH allows clients to work with a single trusted wealth manager as their point of contact for all assets and investments, facilitating an easier and more transparent asset management process.

Now is the Time for UMH

As these assets continue to grow in the years ahead, the industry's views on the UMH also will become clearer. In the meantime, wealth management firms need to continue highlighting the value of UMH. They should position these practices as an easy step forward for investors, as well as internally highlighting the fact that UMHs create highly-efficient and profitable structures for progressive client service.

In addition to the UMH’s potential to achieve better investment outcomes, wider UMH adoption could mean more growth opportunities for managers, sponsors and advisors alike.

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In this Boardroom Series session, Tirdad Shojaie, head of product, marketing and business strategy, Fiserv, discusses the implications of UMH. The Fiserv Boardroom Series is the exclusive, online thought leadership community for Fiserv clients. If you are a Fiserv client and would like to join Boardroom Series, email communities@fiserv.com.

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