What are the benefits of Managed Accounts?
Managed Accounts have benefits for both investors and their advisers.
Investors get access to:
- a diversified, professionally managed investment portfolio that is appropriate to their investment objectives, goals and risk levels
- lower tax and fees, higher diversification and more transparent performance outcomes
- more time with their advisers to develop other strategies
In addition, because Managed Accounts are managed by professional investment managers, investors may take advantage of market opportunities because portfolio changes are made in real time by the manager.
For advisers, the benefits are:
- business efficiencies as written compliance documents are required at the initial investment stage, but thereafter the manager is able to make changes to the portfolio without having to go back to the investor for authorisation.
- A professional investment solution for their clients.
- Advisers can spend more time on the things that matter to their clients, including developing strategies and assessing whether the investor is achieving their goals.
- Advisers are able to communicate effectively any changes to their clients’ portfolios based on information provided by the fund manager
- Clients’ portfolios are managed in real time and the underlying investments are totally transparent to both the adviser and their clients.
Read our interview with InvestSense Head of Adviser Solutions as he discusses the benefits of Managed Accounts for Advisers and their clients.
Catch the next wave - Managed Accounts
The growth of Managed Accounts over the past 10 years has been impressive. The 2022 SPDR ETFs/Investment Trends Managed Accounts Report (March 2022) notes that 1 in 2 advisers are now using Managed Accounts and those users are directing more than 80% of their clients’ portfolios into Managed Accounts. We interview Paul Carrington, Director of InvestSense and Head of Adviser Solutions, to find out why.
Q: Paul, what do you think is driving the shift to managed accounts?
A: Well, I think it’s a range of things. Advisers wanting to offer a professional investment solution for their clients and meet their compliance obligations. Those are probably the main drivers. But they can see the time savings that Managed Accounts brings to the office. Clients are also getting more savvy – they want their portfolios managed in a way that allows them to benefit from market opportunities, and to manage downside risk. Managed Accounts offer all these things and I think both advisers and clients are benefiting from this more sophisticated investment approach.
Q: The Investment Trends Managed Account Report says that advisers estimate they are saving more than 15 hours per week by using Managed Accounts – could that be true?
A: The advisers that I am talking to, say that the switch to Managed Accounts means a lot less compliance requirements – they must meet the compliance obligations when the clients are recommended a change to Managed Accounts, obviously, but once that is in place, any changes to the portfolio are covered. So I honestly believe it is a fair representation of the savings an office can make. It’s not only the compliance and paraplanning areas of an adviser’s business that can benefit. The whole office will be rewarded by the switch. For example, the office can have a “house view” of the investment solution, so that communications material to clients can be standardised. Admin staff wont have to follow up clients for signed authorities – those kinds of savings that you might not necessarily consider initially.
Q: Do you think it means that advisers who focus on investments and portfolio construction lose their ‘point of difference’?
A: From my experience it doesn’t diminish the adviser’s offering in any way. It provides that additional layer of professionalism and depth that an adviser may find hard or time consuming to achieve. Advisers are still going to be involved in assessing client needs, setting the strategy, reporting on progress towards goals and the annual review. Advisers can keep the “investment philosophy” that they have always had, they just use Managed Accounts as the solution (rather than putting together a portfolio themselves). It’s also important to note that all communication about portfolio changes comes directly from the adviser, so they are still the main point of contact.They can also continue with an Investment Committee approach. InvestSense works with advisers who maintain their Investment Committee, but use the skills and analysis of our Investment Team to boost their credentials. Ultimately it comes down to where an adviser can add the most value and I would argue it’s working with clients to achieve their goals. A Managed Account becomes the investment solution that enables the clients to progress with those goals.
Q: So Paul the big question – how does an office go about converting their investment solution to Managed Accounts and is it worth it?
A: Don’t get me wrong, it is a big deal to convert clients across, but it’s definitely worth it. An adviser has a choice – to recommend Managed Accounts at the client’s annual review, in which case it may take a year to fully reap the benefits. Alternatively, they can adopt a ‘project based’ approach, and convert clients in bulk. There are administration companies that can help with this. So it’s really up to the office to decide how fast they want to move across and what resources they have to put into it. But I think ultimately the outcome is better for the client, the adviser has a professional investment solution and all areas of the business benefit through time saving and administration efficiencies
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