Americas Best TAMPS 2024 - 43

2024 AMERICA'S BEST TAMPS
GLOSSARY OF TERMS
ACCOUNT AGGREGATION
Methodology that involves compiling
information from different investment and
bank accounts into a single view of the
client. This may be done by either combining
custody records, screen scraping from other
organizations' websites, or permissionbased
access to other accounts. Account
aggregation is important in order to gain
a complete view of the client's financial
position. Vendors of account aggregation
tools include Albridge (Pershing),
ByAllAccounts (Morningstar) and DST.
ALPHA
Alpha is often referred to as " excess return "
and is used in finance to measure the value
of a strategy, trader or portfolio manager
compared to a purely passive allocation of
assets to match a given benchmark. Alpha
may be positive or negative.
ASSET ALLOCATION
A primary investment decision for wealth
advisors involves recommendations across
the three major asset classes: equities,
fixed income and cash equivalents. Asset
allocation percentages can vary based on
client age, risk tolerance, and the advisor's
opinion of the individual asset classes and
segments.
* Equities: The main investment
classes within equities are large-cap
(capitalization) growth stocks, large-cap
value stocks, large-cap core holdings
(a combination of growth and equity),
mid-cap US equities, small-cap US
equities and international equities (either
developed nations, developing nations or
some combination).
* Fixed Income: The main classes for
fixed income are US government, US
government agencies, US corporations
(corporates), municipals (state and local
governments), high-yield (riskier debts)
and sovereign (non-US governmental
debts).
* Cash and Cash Equivalents: These
include money-market accounts, cash
management accounts (CMAs) and
sweep accounts for holding cash not
currently deployed in the market.
* Sector Rotation: Strategy of selecting
among market segments (e.g., raw
materials or consumer goods) based
BETA
Beta is a measure of the volatility of a
security or portfolio compared to the market
as a whole. As beta approaches 1.0, the
risk/return characteristics of the underlying
investments approach the behavior of the
market as a whole. Lower beta generally
contributes to a less volatile experience.
CUSTODY/CUSTODIAN
The custodian provides a physical or
electronic facility to house investments.
While the wealth advisor directs the
investments, in all but the cases of the
largest firms, the advisor does not have
" custody, " or possession, of a client's
assets. Custodians may require that
checks and other negotiable instruments
be payable to them, not the wealth
advisor. Custodians have gained increased
importance in the minds of clients since the
Bernie Madoff theft occurred, and clients
are now paying attention to custodian
selection. Wealth advisors using a large,
well-known custodian help protect their
clients from investment fraud. Most
investment advisors use large custodians
such as Fidelity, Pershing, TD Ameritrade,
Citi, Charles Schwab, BNY Mellon, State
Street or Northern Trust.
* Reconciliation requires ensuring that
client statements match the records of
the custodian. For many wealth advisors,
this is still a manual task. The task is fully
automated where there is a singularity
on where the advisor or asset manager
feels the market is within the long-term
economic cycle.
AUA OR AUM
Both assets under administration (AUA)
and assets under management (AUM) are
ways to quantify the total market value of
the investments on which a person or entity
advises or manages on behalf of clients.
Numbers provided in our 2023 Model
Portfolios & SMA Strategists guide are the
most recent available.
BENCHMARK
The standard against which the
performance of a security, mutual fund or
investment manager can be measured.
Generally, broad market and marketsegment
stock and bond indexes are used
for this purpose, although some managers
will construct complex hybrid benchmarks.
between the custodian and the platform
provider (e.g., Genpact OpenWealth™ or
SEI's Wealth PlatformSM
).
The task can be one of the most timeconsuming
and difficult tasks of a wealth
manager, and can be eased by the use of
various account aggregation tools.
DRAWDOWN
A drawdown is a peak-to-trough decline
during a specific period for an investment,
trading account, or fund. A drawdown is
usually quoted as the percentage between
the peak and the subsequent trough.
Those in our 2023 Model Portfolios & SMA
Strategists guide reflect the past year,
providing a rolling gauge of recent worstcase
scenarios.
ETF WRAP (ACCOUNT)
Type of managed account where the
client's investment portfolio is invested
solely in exchange-traded funds (ETFs).
The selection and composition of each
ETF class is based on the appropriate
asset allocation model, and is periodically
assessed to respond to market changes.
As with most managed accounts, there is
an asset-based fee charged for the account
and the advisor pays transaction costs. ETF
wraps are built out of indexed vehicles that
require different tax treatment and, in some
cases, tolerance for intraday volatility.
EXPENSE RATIO
An expense ratio, sometimes known as
the management expense ratio, measures
how much investor assets are used for
administrative and other operating expenses.
An expense ratio is determined by dividing
a fund's operating expenses by the average
dollar value of its AUM. Operating expenses
reduce the fund's assets, thereby reducing
the return to investors.
FEEING
The fees paid by the client (which may
range from 85 basis points [bps] to 280
bps dependent on the type of program
and asset classes included), have to be
appropriately divided among the asset
manager, the advisor, the sponsor, the
platform provider and the overlay manager
- usually on a monthly basis. Feeing can
be quite complex in the managed account
space, though new technologies are now
available to assist in the process.
TM
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Americas Best TAMPS 2024

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