Investment
Future proofing with SMAs
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Currently Australians invest $62.1 billion through managed accounts - with uptake among financial advisers having doubled over the past five years. As advisers become more comfortable with these products, and as platform providers and product issuers continue to improve accessibility, flexibility and breadth of choice, there is little doubt that demand will keep on growing.

But how are managed accounts likely to change over the next few years - and what are the underlying forces contributing to this? In this white paper, we share insights from industry experts as well as the latest research, explore how managed accounts can best position advisers for the future - and what it will take to succeed in these times of change.

Growth in a new regulatory world

Managed accounts are increasingly embraced as a way to ensure trust amongst clients. More than ever before, trust is a non-negotiable feature for the longevity of any firm.

It's the propensity to inject trust that makes managed accounts more valued than ever before. Managed accounts offer transparency, efficiency and the opportunity for a far more personalised solution - it essentially removes undue friction between a client and everyone else in the advice value chain and helps clients quickly capitalise on market changes and investment opportunities. In turn, this helps advisers refocus on the things clients truly value - helping them achieve their personal and family wealth goals.

Sterling Shea, global head of wealth and asset management at Dow Jones and a driving force behind the Barron's top advisor ranking, says trust is vital for any adviser-client relationship, especially as they position more as 'wealth stewards'.

In a recent interview, he said, "If you ask me, 'What are the three factors that are going to differentiate winners from losers in the decade to come,' I'd say service, authenticity and trust." He believes the individual advisor needs to create a brand that is defined by values like trust, authenticity, understanding and empathy.

Scaling advice without compromising service

One likely and almost immediate impact of Australia's heightened regulatory requirements is a consolidation within the financial planning industry. The number of advisers in Australia dropped by 2825 between January and June 2019.

Yet at the same time, client numbers are not reducing - which poses an interesting growth challenge for advisers. How can fewer advisers properly advise more clients, without compromising on service?

As a proven platform for efficiency, this is where managed accounts can help.

"Managed accounts allow the practice to scale up," Paul Moran of Moran Partners told us.

"Previously, if you were trying to run individual portfolios, you'd be capped at between 70 to 110 clients. But if you run an efficient practice with managed accounts, you could service as many as 150 clients per adviser - without compromising on client centricity, service and investment outcomes."

Moran runs four different Macquarie portfolios to cover a diverse range of client needs. He believes he can add up to 30 per cent more clients per adviser yet still provide holistic advice, "because you're saving so much time from the underlying investment management."

The latest Investment Trends survey supports this experience. It found advisers using managed accounts to leverage scale and efficiency benefits were able to service 30 per cent more clients.

Practice efficiency alone is not a strong enough case for using managed accounts. As former ASIC deputy chairman Peter Kell noted in a recent interview with the Institute of Managed Account Professionals (IMAP), "If planners and licensees can put their hand on their heart and say, 'This managed account solution is right for my client and is in their best interest', then that's terrific." However, things may go wrong "if a product is introduced primarily to benefit the licensee/adviser."

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