Are Sleeve Accounts Right for You?

If you’re like me, you remember the first days of home Internet. When I first experienced it in the form of dial-up connection, it seemed like an amazing technological advancement, even if it was a little slow. Once I became familiar with navigating the web, it became a highly valuable resource that helped me do more than I ever could before it became available.

And now, thanks to continuing advancements like smartphones, I can find whatever I need almost anywhere, anytime. And, thank goodness, no waiting to sit through that dial tone before hopping on Google.

In terms of managing your clients’ portfolios, sleeve accounting is akin our modern-day, ever-present and superfast Internet, while other forms of maintaining assets separately amongst many accounts are the dial-up version of portfolio construction.

Consider the differences in workflows: In years past, you might go the route of establishing separate accounts for multiple managers, legacy positions, and cash holdings. To do so, you would have to go to the trouble of contacting the custodian to request that the funds be moved from one account to another whenever time to rebalance came, or any other number of events that would require money to be moved from one account to another.

If you’re using virtual sleeve accounting, the process changes to something a little easier. Fire up your portfolio accounting system, select which assets should be parked in a “sleeve” all their own, and save your work. This advancement in technology can save your advisory team countless hours each year in manual work.

A sleeve account can allow you to take a single registration and break the assets within it into multiple virtual accounts, so they can be separately managed for reporting, billing and trading.

Here are five instances when sleeved account management can help increase your efficiency:

You have multiple managers. You may need to give multiple sub-advisors access to the portions of an account they manage, but you obviously don’t want those sub-advisors to see each other’s information.

Implementing a sleeve strategy is the easiest way to navigate a tricky situation. The Orion Trade Order Management platform lets advisors dole out these kinds of access rights. And once the sub-advisor has the ability to view and manage only the portion they need access to, you’ve created an efficiency for your firm. Other options might include breaking out assets into new, individual accounts, and that’s not efficient.

By using sleeves, you can have the sub-advisors work only on the allocation of your clients’ wealth without affecting the work of other managers handling other parts of the portfolio.

You have multiple management strategies. You might find yourself incorporating multiple management strategies for your clients. For example, as one tactic, you’re probably considering which sectors of the market are undervalued or overvalued, and then investing accordingly. But you might also be allocating a certain portion into dividend funds that have a strong record of earnings.

You can use sleeves to sort out these strategies. With a sleeve, you can trade and rebalance a single management strategy without affecting the holdings of other sleeves.

You need to update a lot of accounts to the same strategy. Rebalancing a client’s portfolio can sometimes take a lot of work, especially if the portfolio has multiple managers incorporating a variety of strategies. But rebalancing on a regular schedule is necessary to maintain discipline for your client’s portfolio.

One great aspect to using sleeves is you don’t have to edit allocation percentages one by one. Because each allocation has its own sleeve, the allocations are easily visible, and easy to update across the board.

Think of it this way: At home, you might have a method for keeping organized. It could be a mesh file holder that has a pocket for bills, a pocket for receipts and a pocket for other necessities. With sleeved account management, sleeves act as pockets for your client’s portfolio, which can help you to rebalance your clients’ portfolios quickly and efficiently.

If you need to update an allocation, it reflects out to all the accounts in that sleeve strategy. After taking the time to understand how sleeves work on the front-end, your life can get much easier after the fact.

You need to keep legacy stock. One of the most practical uses for sleeves occurs when you have a client with legacy positions they don’t want traded. In many cases, you would be at risk of accidentally trading these positions; in other cases, you would have to open new accounts to keep them separate from your other managed assets. Sleeves simplify legacy positions on all fronts.

With sleeves, you can park those legacy assets in their own sleeve. Now, there’s no risk of reporting them as managed, or accidentally including them in a trade. Operating in a separate sleeve allows you to bill them separately from the rest of the client’s account as well.

You need to separate cash. Similar in idea to keeping legacy stock, you might also run into a situation where you need to ensure cash stays separated from the rest of a client’s assets. Clients may call you and ask you to set cash aside to help ease their mind in a troubled market.

Another use case we see advisors working through is to fund up to six months of distributions into a sleeve at once, and then let it deplete over that timeframe instead of moving out an amount each month.

Sleeves also allow you to easily implement a dollar-cost averaging strategy with your clients. If your client has $100,000 in cash that they want to invest a little at a time each month, moving that money from your unmanaged cash sleeve to a managed sleeve is as simple a process as you can envision.

As a financial advisor, you want to stay on the cutting edge of technological advances in the financial world. One advancement is sleeved account management. If your staff is working through issues with multiple management strategies or multiple sub-advisors, you owe it to yourself to see if sleeve accounting can help to streamline how your firm handles your trading, reporting, and billing processes.

For more information about how Orion supports sleeve accounting, please contact us here.

Eric Clarke
Eric Clarke
Eric Clarke is the chief executive officer and founder of Orion Advisor Services, which develops solutions that improve advisors’ business operations and interactions with clients. The company’s current vision is to integrate its portfolio accounting system with CRM platforms to increase efficiencies for advisors. Mr. Clarke and his colleagues founded Orion’s predecessor company after they developed an off-the-shelf portfolio accounting system for advisors. Prior to starting Orion, Mr. Clarke served as chief operations officer for CLS Investments, an SEC–registered investment advisor. As an industry-recognized expert in portfolio accounting, Mr. Clarke has written articles that have appeared in Investment News, The Journal of Financial Planning, and others. He earned a bachelor’s degree in accounting from Brigham Young University and a master of business administration degree from the University of Utah.

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