Sep 09, 2016

Why many wealth managers who think they’re ready to capitalize on the ‘Unified Managed Household’ concept aren’t

After years of seeing its potential little realized, the unified managed household (UMH) wealth-management concept is ready to take center stage. The UMH value proposition – giving clients with multiple accounts contributing to a single goal the capacity to manage a target asset allocation regardless of asset location – seemed strong from the start. New technologies, the argument went, would enable the modestly wealthy to benefit from the more holistic, goal-oriented approach to wealth management long reserved for ultra-high-net-worth individuals.

But the rise of robo advisors, with their ability to aggregate and algorithmically analyze an investor's full portfolio picture, has proven at once a help and a challenge to realizing the UMH vision. The good news: properly leveraged, robos provide a critical piece of storefront IT infrastructure essential to making the UMH concept effective and affordable at scale. The bad news: many industry players have wrongly concentrated on the front-end robo infrastructure as the only technical piece needed, while forgetting that the rest of their IT infrastructure has a similarly need for modernization.

Such miscalculation seems understandable given the outsized expectations associated with robos from the outset. Here, after all, was a platform with inherent appeal to tech-savvy millennials – a group who, for the most part, are children of baby boomers, a cohort expected to transfer $30 trillion in wealth to heirs over the next 30 years. But regardless of age, most robo users have taken a common position: they happily use free services that let them easily understand their existing wealth picture (bank accounts, credit cards, mortgage, 401K retirement savings, etc.) but reject offers for advisory help tailored to that unique financial picture.

Conventional wisdom has been that self-learning machine capability would enable robos to provide ever more robust analysis to users over time. And, as robo investment insights grew more sophisticated, it was believed investors would naturally seek a trusted advisor who could turn the latest AI-sourced intel into actionable insight. Many traditional asset managers were so certain of this inevitability that they began buying or building their way into the robo space. From our observation, though, far fewer have invested in comparably up-to-date middle- and back-end IT infrastructure.

As we see it, the robo user interface (UI) has created a relationship view with a wonderful UMH-orientation. But that visual orientation will only deepen investor hunger for a truly unified picture. In short, what the robo UI implies can be accomplished in terms of 360° visibility and more holistic insights, the entire IT infrastructure – front to back – had best be updated and integrated in order to deliver.

The multi-generational danger of not delivering
Failure to deliver to investors' technology expectations represents a particularly huge lost-opportunity risk with millennials, who, as new holders of the title "largest generation," have replaced boomers as prime movers for change. Worse, statistics suggest advisors hoping to pick up with millennials where robo support ends have a tough job ahead. When asked who they trust most for information on money matters in a recent Fidelity Investments survey, 23% of millennials said, "no one." Just as notable, 33% trusted their parents most.

On the upside, the strong parental bond expressed by one in three millennials in Fidelity's survey makes the UMH model a natural fit in facilitating a $1-trillion-a-year wealth transfer to millennials. On the downside, there's much to be lost if the underlying tech infrastructure falls short in millennials' eyes – and, by association, in the eyes of their boomer parents.

It's worth remembering that millennials have real reason to mistrust humans bearing financial advice. This is a generation that grew up hearing allegedly wiser financial minds talk of home buying and getting a college degree as can't-miss investments. It's a school-loan-debt-laden generation whose smartphones and social networks have made their under-employed, part-time-Mc-Job-working lives more livable. To be blunt, it's a generation with more cause to trust financial technology than financial advisors. Get the technology right – from the front end to the back, with no costly gaps in capability or visibility – and maybe even the most skeptical millennial will be open to receiving help from a top-flight financial advisory firm that can manage the same advanced technology with a higher level of success.

Time is running short
There's less time to get the needed end-to-end IT fix right than many making a robo play might hope. Soon, millennials will find better employment opportunities as boomers retire. Soon, they'll be gifted tidy sums of money from their boomer parents. Soon, residential rents will reach irrational heights, spurring more millennials to use some of their mom-and-dad-cash for a down payment or deposit on a home. Soon, their financial profiles will be so complicated by money and personal goals that their lives will cry out for a UMH approach. It's only a question of when – and who will be truly ready to help when the day arrives.


  • Boaz Lahovitsky - Senior Vice President, Wealth Management
  • Katherine L Maher - Vice President, Wealth Management Product Development