Land of Confusion

Assets in separately managed accounts are growing steadily again after hitting a rough patch between 2001 and 2003, but many investors still don't understand what it is they do. Interviews with more than two dozen investors who own SMAs found that people remain befuddled about the benefits of the accounts. Meanwhile, TowerGroup, a Boston-based consultant, predicts that in 2007, managed account assets

Assets in separately managed accounts are growing steadily again after hitting a rough patch between 2001 and 2003, but many investors still don't understand what it is they do.

Interviews with more than two dozen investors who own SMAs found that people remain befuddled about the benefits of the accounts. Meanwhile, TowerGroup, a Boston-based consultant, predicts that in 2007, managed account assets will reach $1.1 trillion. Aren't these two findings at odds with one another? Apparently not.

“Both perspectives are true,” says Marcia Selz, president of Marketing Matrix International, the Los Angeles-based consulting firm that conducted interviews with wealthy investors. “The business will grow, but grow with confusion.”

The good news for advisors, Selz says, is that while many investors don't understand what they have, their advisors do, and that means their services add value. Perhaps this is why managed accounts will comprise 37 percent of advisor pay by 2007, up from 25 percent currently (according to TowerGroup).

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