2024 Year-End Wrap-Up: The Dawning of UMH

Jack Sharry: Hello everyone. Thank you for joining us for our 2024 WealthTech on Deck year end, wrap up and review. Each December, we look back on some of the important conversations and key takeaways from the 50 or so WealthTech on Deck episodes we’ve published this year. And as we do from time to time, I’m going to switch chairs with my friend and fearless producer LifeYield’s Head of Marketing, Matt Nollman. Matt has produced all 180 episodes of WealthTech on Deck over the past three and a half years. For today’s session, Matt will host, and I’ll be the guest, as we discuss what we learn from industry leaders over the course of 2024 and point to episodes that you may have missed. It would be worth a listen. So because there was a clear theme that emerged over the course of the year. We’re going to call this year and episode the dawning of umh. We’ve covered the evolution of the Unified Managed Household and multi-account management with many guests over the course of the year. I’ll cite conversations with people who are designing, building and managing the process of providing what a UMH can offer as we all seek to help advisors, investors and firms achieve improved financial outcomes. Of course, the big news regarding umh is the recent announcement that our company, LifeYield has been acquired by SEI. Started 56 years ago. SEI was one of the first firms to bring technology, operations and asset management together to enable advisors to better support their clients in achieving their goals. Of course, LifeYield has been innovating and setting the standard around multiple account management for the last 16 years, and like us at LifeYield, our colleagues at SEI see a very bright future for all as we understand the value of enabling advisors to manage client holdings in a multi account or unified managed household way, as the press release says of our deal, through this acquisition, SEI will be the first in the industry to provide real time, automated, Unified Managed Household or UMH capabilities in a cost effective, fully bundled overlay solution, providing the industry with the ability to look across all account registrations and implement a holistic financial plan to best optimize after tax returns. So for today’s podcast and with the news, this news is backdrop, I’m going to point to many conversations we’ve had with some of the best and brightest in our industry around the present and the future of the multi account overlay and UMH. Matt the host chair and mic are yours. Please take it away.

Matt Nollman: Thanks, Jack. Thanks for giving the keys over for today, it’s good to be here. So why don’t we just get right into it? I mean, I’ve watched you talk with hundreds of people around the industry on this podcast who are building UMH capabilities for their firm, however it best fits their process, as well as those who support the efforts of the build. So we know from these conversations, and this is probably an understatement, that umh is a complex undertaking. So let’s start with defining what a UMH is, because, as we found in a lot of our conversations, some people have different definitions of it, some people have incomplete definitions of it. And I think it would be the best thing would be to set this table and start with what is a UMH, and why does it matter?

Jack Sharry: I think it’s great way to start great suggestion. When we were talking about getting ready for the show, you suggested, I said, you know, let’s just define it. So we see firms attempting to define pieces of a UMH, but haven’t seen what we would consider to be a full multi-account UMH experience. It is complicated, as you mentioned. This is what we know having built or coordinated the various elements of a umh a unified managed household approach to tax management looks across all account registrations to potentially enhance after tax returns and optimize withdrawals. This integrated perspective enables tax smart investment decisions that consider the unique tax implications across all account types and holdings. The objective is to generate something we call tax alpha across all the accounts and holdings of a household portfolio to potentially improve investor and advisor outcomes.

Matt Nollman: Okay, so that’s the functional definition, right? But why don’t you fill us in on the key elements that need to be in place to achieve optimal tax alpha, and be at the point where you can say, I am practicing a um H, I am building a um H, I have implemented a UMH. What are those elements?

Jack Sharry: So what’s needed as a baseline are the following seven elements. And you’ll notice there’s seven elements. This is not as simple as one thing or another, so we’ll get into that. So first, multi-account aggregation, moving toward multi-account asset location is the starting point. This helps investors and advisors see the benefits of a multi-account approach in locating assets properly. What many are attempting to do is today is to do this manually or with a spreadsheet of some kind or another. It’s now going to be automated. Is automated, and it can deliver what we call tax alpha. The second is tax transition. So there’s been a lot of talk about transitions as you move assets and accounts together and you start to consolidate. This is where moving the assets from where they are invested today into the newly recommended multi-account asset location is the starting point. Tax budgeting needs to be included. Again, what some are doing is doing this manually. This will soon be automated and coordinated across multiple accounts. The third is multi account rebalancing. That is to keep the asset allocation and asset location, and there is a distinction, as most know, allocation versus location, and that is to check to maintain the desired risk profile. That’s the asset allocation piece, and to address the issue of tax drag, that’s the asset location piece. Fourth is tax harvesting. Take advantage of losses to offset gains, reduce tax drag, accelerate tax transitions, in an effort to improve after tax outcomes. We’re intending to, and we do currently, is to do tax loss harvesting at the household level of multi-account exercise. Fifth is tax smart withdrawal, when you need to start taking money, take the best asset from the best location in the most optimal account. That’s the objective in a smart withdrawal. And it’s not just based on some outdated financial accounting practice like HIFO and LIFO or pro-rated or 4% rule, etc. It’s really the optimal sequence of withdrawals. Really what what we’re after. The sixth is Social Security optimization that is to maximize Social Security benefits. People have worked hard their whole life to enjoy these benefits. They’ve paid into a system while they’ve worked, and now want to make sure they get the most out of it, and we have tools that can do that. And then the seventh is trading and reporting. The Easy button for implementing financial plans is what a UMH is about plus the value add reporting to quantify in basis points, in dollars, how a multi account approach, a umh approach is benefiting the investor. This also helps the advisor demonstrate the value of what he or she charges, increases referrals, makes happier and stick your clients. It’s a win all around.

Matt Nollman: So obviously, I’m familiar with all of this. We’ve been talking about this and marketing this for the at least the full five years that I’ve been here. And I know you a little bit longer, Jack, but hearing it all together, it’s obviously a lot. It can be overwhelming. But one thing, if I were going to boil it down, one thing I would think our listeners would benefit to understand is what’s the difference between a UMA and a UMH, a Unified Managed Account versus Unified Managed Household? Because Unified Managed Account and UMA is obviously a term that many around the industry are familiar with and have been working with for a long time. So one thing that we found is explaining the evolution from one to another kind of helps. So why don’t you fill our listeners in a bit?

Jack Sharry: Sure, sure. So I joked that the industry came up with the UMA when they figured how hard it was to create a UMH. So that’s where we started. A lot of people use it interchangeably. It’s really not. The basic difference is a UMA is one account, and a UMH considers multiple accounts, preferably all the accounts in a household. The UMA focuses on consolidating multiple investment strategies within a single account. And while a uma addresses tax complexities, it is limited by definition in that a uma can only address taxes within that one account. This lack of coordination can lead to conflicting strategies across various umas and other accounts and other holdings. The UMH, on the other hand, takes a holistic view. It considers the entire financial picture across all household accounts, and the UMH optimizes tax strategies across the household portfolio, helping to reduce overlap and improve after tax returns. A UMH should should offer asset location, customized withdrawal strategies and more effective financial outcomes, as we point out to people who achieve the positive results a UMH can offer improving after tax returns and income is inherently a multi-account exercise.

Matt Nollman: Now, I think it’s good that you cleared that up, Jack. I mean, I know there’s a lot of misconceptions around the distinction between UMAs and UMHs and how they relate to each other. But let’s shift gears a bit and talk about some of the more memorable conversations you’ve had with industry leaders on this podcast in 2024 who are working on these issues. So why don’t you fill us in on a couple of these conversations our listeners might want to recheck out sure.

Jack Sharry: As you know, Matt, we started a sub series to our WealthTech on Deck podcast earlier this year that we call WealthTech in the weeds. We did this largely for our industry colleagues who want to understand the nits and grits of multi-account overlay and UMH management, and we knew they wanted to hear from a variety of experts for our WealthTech in the Weeds series. I was joined by either Mark Hoffman, LifeYield’s CEO, or Martin Cowley, LifeYield’s head of product, and these two folks know as much about UMH as anyone in our industry, our wealth, our first WealthTech in the Weeds podcast was with our friend Charles Smith of EY. We’ve worked with Charles at a variety of stops along the way. Over the past many years, Charles has a long standing experience and expertise and expertise in advisory digital experience in umh. We then talked to Rose Palazzo, who joined us for a conversation when she headed MoneyGuidePro, she is now at Edward Jones. Rose has done more on converting financial planning to the implementation of multi-account management and ultimately retirement income than anyone in our industry. In my experience, she is the person who led the design and build of Morgan Stanley’s intelligent withdrawals, which, in my opinion, is far and away the most advanced process of its kind in the industry. And then there was Jeff Benfield, the lead person on product and platform at SEI he has built a number of leading tax management tools. SEI has been a quiet leader in this regard, but I’m confident they will be quiet no more. You’re going to be hearing a lot more from them. Our friend Eric Lordi was on the show. Eric worked closely with Rose Palazzo at Morgan Stanley on the multi-account management, he took his expertise to JP Morgan. Be on the lookout for what’s coming soon from JP Morgan. It has the makings of something special. I suspect Eric will be continuing his innovative ways at Citi Wealth. I will see him re emerge early next year. And then our friend Roger Paradiso from Franklin Templeton weighed in as well, in my view, and many others, Roger invented the UMA. I wouldn’t expect to rest on those laurels, though, if there were an all star team of a, UMH all star team made up of folks around the industry. I think it’s pretty safe to say that all the folks you mentioned would be on that team, wouldn’t you think? No doubt, couldn’t agree more. These are, they really are thoughtful, innovative people that have done the work. There’s a lot to doing the work, and they’ve, they’ve all done it. Listen to any of my podcast conversation with these folks, and you’ll get an inside baseball look at what it takes to build a um H. I should note all these podcast episodes are available on the lifeyield.com website. We also created a website dedicated to WealthTech on Deck called surprisingly wealthtechondeck.com so check it out either place. And as you know, Matt, we also talked with executives from across the industry around the strategic importance of including a UMH as part of their effort to differentiate their firms and to fuel growth. We’ve hosted podcasts with our colleagues at SEI, including CEO Ryan Hicke, CFO Sean Denham and Erich Holland, who is the Executive Managing Director and Head of Sales and Experience. They share their perspective on the pod, on where they see the industry headed and where they see SEI headed, those are all worth a listen what they’re putting together. I think is impressive. And as I tend to do when I’m impressed with what smart folks are up to, I wrote a column in financial advisor magazine on the emerging story of SEI a few months back Mark Hoffman, and I had a great conversation with Ted Diming. Ted is the Global Head of Wealth Management Advisory solutions at JP Morgan. We also wrote a story for FA Mag about what JP Morgan is up to around multi-account management, again, industry leading stuff, and I always enjoy speaking with Jay Link, who heads fiduciary programs and platforms at Merrill Bank of America, we talked about leadership and innovation. So on top of our conversations with all the A-listers that you mentioned earlier, and these senior executives, we also had conversations around AI research, innovation and what you’re calling Jack the digital frontier. So tell us about some of your favorite ones that fall in this category. I’d love to make up expressions like digital frontier, but happens to be true, we were on the forward lines of the digital frontier. So someone who’s paying close attention to the UMH space is Scott Smith at Cerulli really I’m jumping the gun here a little bit, as Scott’s episode was recorded earlier this month and will appear in January, but I urge you to give a listen. Scott has done some really interesting research around this, and I know you’ll be seeing more of his commentary on the umh topic in the years ahead. His role at Cerulli is to help clients understand how to optimize their platforms given the evolving demand for financial advice. I always enjoy speaking to Rob Pettman, who is the president and CRO at TIFIN, very impressed with all the ways TIFIN is serving the wealth annuity defined contribution and asset management spaces with AI Amy Young of Microsoft is someone I listen to carefully. No surprise, Microsoft has made AI job one, and Amy is at the point of the spear for our industry. Nalika Nanayakkara and Mike Lee, two senior leaders at EY, share their perspective and the on the future of advice and offered some very useful insights. Michael Liersch, who heads up advice and planning at Wells Fargo, is doing some very innovative work, especially taking what Wells is building on top of their mobile app called Lifesake. That’s another impressive entry and worth a listen.

Matt Nollman: So there’s obviously a lot of ground we could cover, but unfortunately we can’t cover it all. Without going on for hours and hours. So as we look to wrap up, why don’t we talk about a few of the key themes that people should know if they want to build multi account or UMH capabilities? We put together some questions ourselves on what firms need to understand in order to provide multi-account UMH services. So question number one, as a firm or as an advisor, why is it important that I pursue a multi-account UMH experience? What’s in it for me?

Jack Sharry: So it’s about more money. So years ago, we commissioned EY to do an independent analysis of LifeYield’s methodology. They found financial outcomes can be improved by up to 33% that kind of improvement, quite frankly, as hard to come by, as anyone who knows our business could attest, and to help the client and advisor understand what that means, our technology was developed to show the benefit in dollars and basis points. This process can be complex. Being able to show the financial benefits helps advisors and clients determine the best way forward.

Matt Nollman: So if I wanted to offer a multi-account UMH or overlay experience. Where would I start?

Jack Sharry: Well, every firm is different. It has a lot to do with what your client base looks like. Whatever makes the most sense for your clients, your firm is really the best place to start. All firms have legacy systems that need to be looked at, factoring what is found. Most firms start with tax-efficient withdrawals or tax-smart asset, location, those tend to be the two that people embark on. First, we recommend determining what your clients see as the most pressing financial issue is that accumulation, maximizing retirement income. The key is to embrace the multi-account methodology, then build or top adopt technology over time that can implement what the firm has determined to be their priorities. But it’s one at a time. You don’t boil the ocean, you do one piece at a time. And we’ll be talking about in future episodes how this can be done in a in an easier way. But more on that. I’ll tease that for now. But we’ve got more to talk about how to make this easier for advisors and their firms, right?

Matt Nollman: So, I mean, we’ve talked to many firms that are looking at taking the multi-account approach, but one thing that comes up in nearly every conversation is the complexity and the potential cost. So what do you suggest firms that are concerned with I mean, Jack, the questions could continue, but I think this is probably a good point to shift to completing our discussion on UMH for the day and moving on to our closing question. So we’ve done this host guest switch a few times where I ask you something that you do outside of work, that you’re particularly passionate about, that people might find interesting or surprising. But since you’ve been on in the guest chair a few times, I figured we’d switch it up a little bit this week, and selfishly, I’d like to know the answer to this too. So what are the top three pieces of career advice that you have ever received that have either shaped or completely changed the way that you operate?

Jack Sharry: These things do? In my mind, the best place to start I’m in these conversations every day is with a conversation is really to talk to someone, and I’m that’s what I do. I talk with folks about what they’re trying to achieve, where they’re trying to go. So I spend most of my time educating people across the industry that’s executives, platform builders, researchers, tech partners, consultants, advisors, about how to implement a UMH approach. The better people understand what is involved with the issues around complexity, time to market and costs, the better the process goes for everyone. Frankly, one of the big challenges with building a multi account platform is that it is inherently a firm, wide, horizontal challenge. By that, I mean the firm needs to work and make decisions between different areas of the firm to build and maintain systems that will need to be coordinated to produce the desired results. We spend a lot of time on this with our clients. If I’m honest, the single biggest challenge we find is getting all the departments, all the silos, to work together. And that is also why it is important to have a single executive sponsor or leader, and it is critical to have a designated day to day driver of the process who collaborates across the firm. These are the two critical pieces that are necessary to start, along with a number of other things that we’ve learned, we have been able to help many firms work together internally and with partners to achieve their objectives. It left out the partners, because this is takes a village to build a UMH, there’s a lot to it. We really need to be working with all of those. But like I said, this is the hardest challenge, is, frankly the politics of it, but it we’ve learned. And frankly, it can be done, but it requires some education. It requires some communication and collaboration, and something we spend an awful lot of time doing with our clients to help them achieve that. Well, Matt, we’ve worked together now five years or so.

Matt Nollman: It feels like 10.

Jack Sharry: I think you’ve come to learn I’m nothing if not consistent. I say the same things over and over again. I do find things that make sense said over and over are helpful. I’m sure it drives you nuts. Each of the three pieces of advice I will share come from someone I respect, and where I have not only embraced it and implemented what they recommended in my own life, I’ve also shared it with many folks in elementary. You are aware, I have a whole bunch a lot of folks that I mentor, so I spend a lot of time in these kinds of conversations, which I enjoy thoroughly. I learned early on, you should always acknowledge source. In other words, always acknowledge the person who taught you. So I will mention the people that taught me this stuff, and I do. So when I mentor folks, I recently came across Francis FREI, that’s F, R, E, I guess you’re wondering. I had not heard of her. I don’t know how I missed her. She is a Harvard Business School professor. Has done a lot of really interesting consulting work. She developed something she calls The Trust Triangle, which really fits into my thinking and methodology about how I approach life and work and all the rest. You should check out her TED talk if you like what you hear. It’s a 20 minute TED talk, very powerful. She also has a podcast. Has written books on leadership. I’ve become a big fan. What I’m about to share takes her basic tenets and I’ve modified them very slightly based on things I’ve learned from others. So the trust triangle starts with authenticity, and that’s pretty simply. Be authentic. Be you. As Frei points out, we can all sniff out in authenticity. In a moment you’ve been with someone who’s kind of BS in you, you can tell in a moment she points out that when you are authentic, it creates the opportunity for the person on the other side of the conversation to be more authentic as well. This creates the opportunity to be more productive and effective together because you’re having authentic dialog. The second point to The Trust Triangle is the importance of empathy. I have written extensively on deep listening, and by really hearing what the other has to say. In my mind, empathy and deep listening are two sides of the same coin. If you listen well, you demonstrate your care and concern, and you will connect more deeply and productively with the other. I learned deep listening from Dr Fernando Flores, who was at one time, the finance minister of Chile at the tender age of 27 way back when. I took courses from him decades ago, and have learned the utter power of listening for what the other is committed to as a practice over those 40 years, I even wrote a book on the topic Authentic and Ethical Persuasion. I’ve taught this at Babson College for the past 10 years, and has continued to do so. I’ve adopted the third piece of Frei’s The Trust Triangle, but have modified it slightly based on my own experience. I would call the third piece Advancing The Discourse, or helping others achieve their objectives. I find the best delivery mechanism to help advance the discourse, the conversation or to help others achieve their objectives is through compelling narratives or storytelling that align with their objectives. The key aspect to all of these points, as I tell the Babson students, is they must be followed and developed as a practice, something you work at in every conversation, which I try to do in every conversation, as I try to do this, to be authentic, to listen deeply and with empathy and to tell compelling stories that advance the discourse and help others achieve their objectives, I find it’s a win for all.

Matt Nollman: Well, thanks, Jack. I genuinely appreciated this conversation, as I do all of our other ones for our audience. Thank you for tuning in. If you’ve enjoyed this podcast, please rate, review, subscribe and share what we’re doing here at WealthTech on Deck. We’re available wherever you get your podcasts. You should also check us out on our dedicated website, wealthtechondeck.com all of our episodes are there, along with articles, perspectives and curated content from many leaders around the industry. Thank you, Jack, once again, this has been a lot of fun.

Jack Sharry: Yeah, I think we should do this again. What do you think, Matt, I’d be shocked if we didn’t. Thanks so much.

Matt Nollman: Thanks, Jack.