UMAs for Flexibility and Customization

As client portfolios have grown in complexity —incorporating a mix of active and passive strategies, multiple managers, and a heightened focus on tax efficiency—the structure used to implement those portfolios has become increasingly important. Unified Managed Accounts (UMAs) have emerged as a compelling strategy, offering financial advisors a more integrated and scalable way to deliver diversified investment portfolios.

What Is a Unified Managed Account?

A Unified Managed Account is a single investment account that consolidates multiple types of investment strategies and vehicles into one coordinated structure. Within a UMA, an investor can hold separately managed accounts (SMAs), exchange-traded funds, mutual funds, and individual securities such as stocks and bonds. In a UMA, the entire portfolio is viewed and managed as a single entity.

This shift from a fragmented approach to an integrated one is foundational to understanding the benefits UMAs can provide.

The Benefits of Unifying

Historically, advisors often built portfolios by combining multiple standalone strategies, each housed in a separate account. While this approach allowed for diversification across managers and styles, it also introduced inefficiencies surrounding overlap, uncoordinated trade timing, fractured taxable record keeping, and complex portfolio management.

UMAs address these issues by centralizing implementation. Rather than managing each piece of the portfolio sporadically, the manager evaluates exposures, trades, and risks across the entire account at one time. This creates a more cohesive and intentional portfolio, better aligned with the client’s overall objectives.

Holistic Portfolio Construction

One of the most significant advantages of a UMA is the ability to construct and manage the portfolio holistically. Because all holdings reside in a single account, it allows for full visibility on a total portfolio basis. This gives more precise control over asset allocation, factor exposures, and concentration risks.

In practice, this means the portfolio is less likely to suffer from unintended duplication. For example, the manager would be able to more easily identify an overall domestic equity bias that might arise from the arrangement of multiple strategies, an unintended style tilt, or an income deficiency. In a UMA, those factors are more easily identified as the combination of strategies is homogenized into a single output. The result is a portfolio that better captures the original investment intent, with a stronger connection between the strategy being implemented and the outcomes delivered.

Tax Efficiency as a Structural Advantage

Tax management is another area where UMAs offer a significant advantage. Because all assets are held within a single account, tax optimization can occur across the entire portfolio rather than within isolated accounts.

Tax loss harvesting efficiencies are ever apparent under this structure. It furthers your options for immediate and concurrent loss harvesting (if available) when potentially realizing gains during rebalancing and trading. It also can go a long way in avoiding potential wash sale rule violations as it eliminates the disconnect between buying a security back too early between multiple accounts before the 30-day wash sale period has expired.

The ability to include SMAs into UMAs can also be a potent tool to potentially reduce overall taxable capital gains as each individual security within the SMA is eligible to be harvested if a loss is present. This differs from a standard fund where the individual components are aggregated at the fund level, and the advisor or overlay manager is unable to isolate specific securities for harvesting.

Ultimately, the UMA construct provides a full picture of tax impacts and opportunities to better serve client interests and after-tax returns.

The Building Blocks

As investor expectations continue to shift, the demand for more tailored portfolio strategies has grown. Clients increasingly seek portfolios that align with their individual preferences, whether that means avoiding certain securities, or leaning into preferred styles, geographies and risk preferences. Traditionally, building bespoke portfolios for each unique client circumstance would have been burdensome as complexities compound.

That’s where the “building block” components of UMAs shine. With a wide array of strategy offerings, a manager is able to assemble different components (building blocks) that fit the client’s goals into a single account. For example, does your client want domestic equity capital appreciation, individual stock exposure, and a long cycle risk mitigation component? Or what about municipal bond exposure with a core of an aggressive “go-anywhere” global equity exchange-traded fund (ETF) sleeve. Well, there’s an answer for that by combining individual building block strategies for each of those areas into the single UMA.

Each of those individual strategies serves as the building blocks of the total portfolio. With them, you get the optionality of customization, while maintaining portfolio management efficiencies. This flexibility enables advisors to offer more personalized portfolios while continuing to rely on model frameworks, external strategies, and centralized portfolio management. In doing so, it effectively extends a level of institutional-grade customization to a wider range of clients.

Final Thoughts

Unified Managed Accounts represent a significant investment management tool to drive client success. By consolidating multiple strategies into a single, coordinated structure, they allow advisors efficient flexibility and customization.

LPL Research remains committed to serving as your trusted investment partner. Advisors interested in incorporating UMAs and leveraging LPL Research’s building block model portfolios are encouraged to contact us. Investors should reach out to their LPL financial advisor for additional information and guidance.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.​

Asset allocation does not ensure a profit or protect against a loss.

Advisory accounts may not be appropriate for every investor. A brokerage account may be more appropriate if you prefer a buy-and-hold strategy for a long period of time.