Unified Managed Household Account (UMHA): Overview, Pros and Cons

What Is a Unified Managed Household Account (UMHA)?

A unified managed household account (UMHA) is a privately managed account that consolidates multiple unaffiliated products including mutual funds, ETFs, and individual securities. This type of account allows immediate family members, such as parents and children, to access the account.

A unified managed household account allows for ease of administration for the financial institution, along with greater transparency for the investing family.

Understanding Unified Managed Household Accounts (UMHAs)

Unified managed household accounts (UMHAs) operate on a single, integrated system. This system allows a financial advisor to view various assets and product types to create performance reports. In some UMHA programs, clients can create account groups for each investment goal. The system supports groupings with individual performance reports, billing, and statements.

The asset management firm where the UMHA is located will designate a central relationship manager for large families that have accounts located in different parts of the business. Often, UMHAs are discretionary programs; this means the account's financial advisor has the authority to make investing decisions. As with mutual-fund advisory programs, the investor selects a model based on risk tolerance and goals, and the firm takes care of rebalancing or even changing asset allocations altogether, depending on the degree of discretion inherent in a particular program.

Pros and Cons of a UMHA

Consumers should be aware of both the advantages and drawbacks of consolidating accounts into a UMHA.

Pros Explains

• Transparency: Since this account offers complete transparency, all family members with access to the account can gain a deeper understanding of their assets.
• Streamlined management: Because all the securities, mutual funds, and ETFs held by a household are managed through one account, investors have an opportunity to earn better risk-adjusted and tax-managed returns due to comprehensive oversight, execution, and reporting.  
• Lower fees: Investors can reduce the number of fees they must pay since all their assets are held in a single account. Fee discounts may be available based on your household’s assets under management.
• Simplification: Financial advisors can customize investment decisions for each client in the context of their household, which simplifies operational procedures that may otherwise be complex and cumbersome. UMHAs also streamline paperwork and allow for more sophisticated tax management.
  

Cons Explained

• No private accounts: A UMHA combines access and assets; if you want private investments or anything to be held by a single household member, you will need a separate account.
• Success depends on management: A UMHA's performance will depend largely on the account manager's success in selecting securities and making adjustments to the allocation. Investors should be selective when choosing the firm that will manage their UMHA.
  

The Bottom Line

A unified managed household account (UMHA) combines multiple unaffiliated investment products, into a single managed account. It can hold assets such as securities, ETFs, and mutual funds. Multiple immediate family members can access the account. This structure allows for streamlined management, lower fees, and simplified paperwork and tax management.

Because a UMHA is a managed account, it will have an account manager who is responsible for rebalancing the assets in the account to ensure that it continues to meet the account holders' long-term goals and risk tolerance. The returns generated by a UMHA largely depend on the skill and success of this account manager, so investors should carefully choose the firm at which they plan to open a UMHA.