Unified Managed Accounts: An Innovation

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Unified Managed Accounts An Innovation? MMI
Fall Conference October 20,2004
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Panelists

• Co-Moderators
• Ashley Rabun, President InvestorReach
• Wayne Morris, SVP Wachovia Securities
• Panelists
• Jennifer Abate, Director, Lazard Asset Management
• Paul Hatch, Director of Managed Accounts, Smith
  Barney
• Jay Link, Associate Director, Consulting Services
  Group,
• Morgan Stanley

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What is a UMA?

• Some define as a single custodial account with
  one contract that
• Has multiple sleeves for separate investments
• Can incorporate different security types SMAs,
  mutual funds, ETFs, etc.
• Uses an overlay manager
• Reports client performance in one consolidated
  statement
• Means different things to different
  sponsors/entities

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Sponsors Issues for Today

• What does UMA mean to your firm? What investments
  are included?
• When did you/are you launching UMA?
• What were/are your major challenges?
• Operations
• Systems integration
• Investment overlay advisor or sponsor
• Manager participation
• Individual tax management
• Rebalancing
• What enhancements are you planning?
• Impact to FAs and investors?

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Asset Managers Issues for Today

• What does UMA participation mean to your firm?
• Apprehensions of various constituents at firm?
• Benefits to you?

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What is a UMA at Smith Barney?

• SB UMA (IIS) is a single custodial account with
  one contract that
• Has multiple sleeves for separate investments
• Can incorporate different security types SMAs,
  mutual funds, ETFs, etc.
• Does NOT use an overlay manager
• Reports client performance in one consolidated
  statement
• Provides for rebalancing
• Launched one year ago
• 70 of accounts are new money
• 50 of accounts combine funds and SMAs
• Average account size 1MM

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Smith Barney Issues and Future Development

• IIS is our platform of the future and the PRESENT
• Expect full integration with ALL fee based
  products by mid year 06
• Includes Rep as Portfolio Manager and Fee based
  brokerage
• Alternative Investments remain a challenge but
  expect integration to begin in 05
• Major Challenges
• Systems development is substantial
• Regulatory hurdles
• Pricing
• Tools are critical
• Education and Training are keys to adoption
• Simplicity is BIGGEST challenge

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Morgan Stanleys UMA Defined

• UMA a single brokerage account
• Unified portfolio multiple brokerage accounts
  linked for aggregating portfolio components
• UMAs can be used in combination to create a
  unified portfolio (for example, taxable
  accounts and IRAs)
• Ideal is to limit the number of custody accounts
  in delivery of holistic investment solution

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Key UMA Features

• Single client profiling and asset allocation
  process
• One client contract
• Manager and investment vehicle selection
• Systematic rebalancing
• Ability to segregate holdings and investment
  activity for each discipline
• Actual account performance at investment
  discipline and account level
• Single performance report, statement and tax
  report

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Evolution

• Today
• Fixed allocations
• Affiliated SMAs
• External SMAs
• Affiliated mutual funds
• ETFs

• Tomorrow
• Custom allocations
• Full open architecture
• SMAs
• ETFs
• Mutual funds
• Alternatives
• Rep-as-PM
• Non-discretionary advisory

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Asset Managers Issues for Today

• What does UMA participation mean to your firm?
• Apprehensions of various constituents at firm?
• Benefits to you?