Building a Better Separate Account Mousetrap

Smith Barney is trying to make it easier for its reps to monitor client accounts.

Separately managed accounts can be confusing, but the paperwork and operations behind them need not be — or at least that's the thrust of a new effort by Smith Barney Consulting Group.

Smith Barney is in the midst of rolling out its new Integrated Investment Service, which aims to streamline the account-opening process and give reps better tools for monitoring client accounts.

“The idea was to make an experience where the client is only going to sign one consulting contract and one set of documents,” says Frank Campanale, chairman and CEO of Smith Barney Consulting Group. “It's to pull all of this information together in such a fashion that they're looking at one super-account.”

The system, which underwent several months of testing, was rolled out in the middle of August and will be introduced gradually to branches by October.

In the past, many firms have required SMA clients to sign duplicate contracts for each individual separate account manager they might be using. Further complicating matters, older account-opening technology does not typically take into account a client's other holdings, including exchange-traded funds and mutual funds or individual securities.

Over the last 18 months, firms have taken a two-track approach to improving this situation. Some created multi-style accounts that allowed one über-manager to oversee the movements of each individual manager. Others deployed “overlay technology” to appoint a third-party firm as a middleman between the managers and the brokers. This arrangement, in effect, made those money managers subadvisors to the account.

But neither of these approaches put enough power in the hands of the individual reps, Campanale says. This new platform is Smith Barney's answer to that problem. Reps will be able to conduct manager searches and monitor asset allocation. They will also have access to technology that will help them sort through complex tax-management issues that can arise from using multiple managers.

“Instead of having to say, ‘This guy has mutual funds here, separate accounts here,’ it's allowing them to manage portfolios more concisely and comprehensively,” says Tim Williams, director of product management for Smith Barney Consulting Group.

The process will not yet allow all stocks and bonds to be viewed in one account, but Williams says the group is working on that for future versions of the platform.

The process has been tested with about 50 different branches over the last few months and will be rolled out in waves to Smith Barney's branch network at a rate of about 50 per week.

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