We recently hosted our inaugural SMA roundtable, which was attended by industry executives focused on distributing and supporting their firms’ SMA business. The discussion included a blend of excitement about the future opportunity of SMAs and the challenges of supporting the business from personnel and operations standpoints. This combination of optimism and uncertainty was the basis for a very insightful dialogue between industry practitioners. There were three main takeaways from the event:
- Tax management and customization will be drivers of growth… and not just limited to a few asset managers
Unsurprisingly, tax management and customization are expected to continue to drive growth because of the value it allows advisors to pass to their clients. But it was surprising to see how many managers at the roundtable are either pursuing or already delivering these solutions. The knee-jerk reaction to hearing “direct indexing” is to think about offerings from only a handful of sizeable providers. However, based on the response of the group, the facilitation of tax-management on SMAs is much broader than that.
Use of a third party to apply overlay to active equity strategies makes this route more available to managers who had previously shied away from the operational and support challenges of tax management/customization.
Our recent SMA research, based on a survey of asset managers, found that 44% of respondents offer customized/personalized fixed-income SMAs. In the case of large advisor teams and RIAs, customized fixed income (particularly municipals) is becoming the best path to beginning relationships.
- Specialist teams create a differentiator
Our recent “Productivity Insights” research on asset managers’ headcounts showed the average number of specialists at SMA asset managers has increased slightly in 2025. A bit more than a quarter (29%) of managers now have the SMA specialist role, just up from 28% last year. While the numbers haven’t moved significantly, most of the roundtable discussion focused on the point-of-sale and ongoing support of SMAs from specialists. More than ever, SMAs are a service, not a product. The use of various types of specialists to support this business can be critical, depending on the type of SMA business an asset manager is engaged with.
Particularly with cases of manager-traded strategies and the application of tax management, there is an evolving need for additional support that may not be the best fit for an external sales role—either due to time management or expertise demands.
The way in which this support is structured is a differentiator for firms—particularly in the laddered bond space where product and pricing can be commoditized. We heard of several ways to support this—e.g., centralized desk, a specialist assigned to each division, etc. Some firms found that having the specialist role be a single point of contact on SMA questions was most effective, while others saw the role to be an on-demand call from the external salesperson. In each case, the current structure for each firm was a result of trial and error, but was seen nearly universally as a reason firms were able to grow their SMA business. This is not to say, though, that every SMA provider needs specialists—again, it depends on what type of SMA solution the firm is providing.
- Growth will not be focused on one channel
A central question of the half-day session was “where will the growth be?” Our research has shown that SMA managers believe that sales opportunity by channel will not differ significantly from today. Similar sentiment was echoed at the event, where it wasn’t so much growth in certain channels, but rather growth with certain types of advisors/teams and client needs. The wirehouse firms have the lion’s share of sales today, and have all the components to continue to be the heavyweights. But asset managers are finding ways to unlock new opportunities with enterprise RIAs and independent BDs—it is on a partnership-by-partnership basis, rather than widespread adoption across other channels.
There is part of the market defined by platform sophistication (the wirehouse channel) and another defined by investor need without platform infrastructure. There is opportunity in both, but the SMA offerings and support that asset managers need in each will vary.
While some opportunities and challenges of the SMA market are universal, the most critical will vary from manager to manager. SMA managers need to be clear about the value they provide through their SMA service and the role SMAs play within their firm. There are too many opportunities and challenges to address if these questions cannot be answered. Our Distribution Solutions team is ready to answer these questions, and our WalletShare for SMAs service facilitates the execution of SMA go-to-market strategies with insights into which advisors are doing meaningful SMA business. Contact us to learn more.
