Financial Opinion and Insights

Do You Have a UMA?

Jim Lorenzen, CFP®

Jim Lorenzen, CFP®

You might like it!  UMA is short for `unified managed accounts’ and they’re becoming increasingly popular with both advisors as well as their clients.

Scattered Assets

I can’t even begin to tell you how many times over the years I’ve come in contact with people who have multiple accounts, each containing multiple investments, scattered among different institutions with different advisors – all under the misguided and mistaken belief that they are diversifying their risk.  The pity is nothing could be further from the truth.   The only thing they’ve really accomplished is complicating their lives – multiple statements, year-end 1099s and, virtually always, the right hand never knowing what the left hand is doing.   This does not reduce risk.  If anything, it adds to it

The Benefits

The UMA allows investors to combine investments of virtually all types into a single registration.  This reduces the number of accounts per household, also the number of statements, the paperwork, and provides the investor and the advisor with a complete holistic picture of what’s going on making planning more meaningful.   Clients with taxable accounts not only benefit from a more efficient investment process, but can deal with a single 1099 form at the end of the tax year.

UMAs are also well suited to retirement income planning because they allow clients to have many different types of assets in a single account.  Assets can be grown during the accumulation phase of life, then allocations can be easily shifted into the appropriate mix for the distribution phase.  In effect, the UMA account allows investors, with the help of their advisors, to create their own personal pension plan.

Many UMAs platforms today offer only a small number of active managers; so, it pays to work with an advisor who has access to a variety of options beyond those available in-house.

The Drawbacks

There are structural issues within the fixed-income arena that make automated trading for portfolio rebalancing problematic.  Take municipal bonds, for example:  There are more than 50,000 issuers and some of the individual bond issues can be quite small, which limits market liquidity on the sell-side.  However, a good UMA platform allows advisors to see fixed-income positions and will alert them when they may need to rebalance the position.

The Future

I have several clients in UMAs.  The tax-efficiency alone can often make these worthwhile; but, clients do love the fact their lives are no longer cluttered and they’re no longer mistaking duplication for diversification.


Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California.  He’s been a headline speaker at conventions throughout the United States, Canada, and the U.K. and has appeared in `The Journal of Compensation and Benefits’, as well as in The Profit Sharing Council of America’s `Insights’.    Jim has also appeared on American Airlines’ `Sky Radio’, heard on more than 19,000 flights.  IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description.  Nothing contained herein should be regarded as tax or legal advice and the reader is urged to seek competent counsel to address those issues.   The above represents the author’s opinion and should not be regarded as investment advice which is provided only to IFG clients upon completion of a formal financial and investment plan.   For questions or comments, you can reach Jim at 805.265.5416 or through the IFG website, http://www.indfin.com.