UBS, Morgan Stanley Expand ‘No-Fee’ SMA Programs
UBS Wealth Management USA and Morgan Stanley Wealth Management in the past week have both expanded the number of third-party strategies being offered on their ‘no-fee’ separately managed account programs as they look to draw in more assets to advisory accounts.
As part of the pitch, UBS picks up the additional asset manager fee on the account, which can be as much as 0.50% although the customer still pays asset-based advisory account fees to UBS as well as underlying fund expenses, according to UBS’s fund management brochures.
Jason Chandler, head of UBS Wealth Management USA, said the additional strategies “increase investor choice and provide greater differentiation” for meeting client objectives. His remarks echoed statements he made earlier when it launched the program and cited the Securities and Exchange Commission’s Regulation Best Interest client-care regulation.
“At the same time, we’re giving our advisors a competitive advantage by adding strategies that complement our offering in a pricing structure our clients love,” Chandler said in a written statement.
UBS, which has been aggressively pitching the offering and touted the $70 billion in assets in the program at the end of the first quarter, now has 76 no-fee third-party strategies, a person familiar with the matter said. UBS has also lowered the barrier to entry for the program by reducing its account minimum to $25,000 from $50,000, according to the wrap account brochure.
The wirehouse opened the program with a zero-fee offering on strategies offered through its own asset management unit but in July added third-party strategies from Nataki affiliate Active Index Advisors, Breckinridge Capital Advisors and Goldman Sachs Asset Management on nine separately managed accounts.
At the end of April, Morgan Stanley similarly expanded its unified management account platform to include no-management fee offerings for clients who met a $25,000 investment minimum.
Morgan Stanley now includes no-fee products from BlackRock, JPMorgan Asset Management and Goldman Sachs Asset Management, according to an internal memo sent last week. The expansion means Morgan Stanley’s financial advisors may offer clients a choice among three ETF model suites with no sub-management fee, the company said.
The offerings give advisors better opportunities to build scale and increase efficiencies, said Brian Rosevear, head of model solutions for the consulting group at Morgan Stanley Wealth Management.
“Financial advisors are recognizing the importance of building scale and efficiency into their practices in order to enhance client engagement and grow their businesses,” Rosevear said in a statement.
Morgan Stanley’s Managed Advisory Portfolio Solutions program has 16 ‘no-fee’ model ‘suites’ from 10 outside asset managers and includes over 100 strategies total.
To be sure, the ‘no-fee’ moniker comes with some qualifications. UBS notes in its wrap fee program brochure that customers in the ‘no-fee’ program may have to pay a higher account fee because UBS restricts the amount that advisors can discount on accounts in the program. UBS advisors can charge a maximum of 2.50%, according to the ADV, although most do not charge the full amount.
Customers in the ‘free’ strategies may also still pay fees for additional ‘premium’ services such as tax management that can be 10 to 13 basis points, UBS’s Form ADV states.
Broker compensation is not affected by the change because advisors did not collect the SMA fee that UBS is now providing to the firms, according to the same person as above.
-Mason Braswell contributed to this story.