Managed accounts ripe for the picking

The take-up of managed accounts by advisers has been frustratingly slow at present, but regulatory guidance from the corporate regulator could have cleared the path for increased activity in managed accounts.

That is the view of Tria Investment Partners and NMG Consulting, which said there was only approximately $10 billion in separately managed accounts and another $10 billion in managed discretionary account services after all these years.

This was despite almost one-in-five advisers indicating they expected to increase their use of managed accounts over the next three years, according to Tria's Australian Adviser Insights Programme, which surveyed the views of more than 200 independent advisers.

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"Which begs the question — will it be different this time?" principal consultant, David Hutchison asked.

"We think so. The adoption of managed accounts relies on six discrete pieces of the jigsaw puzzle coming together.

"Advice firms are keen to decide how they structure their portfolios — tailoring it to suit their advice approach, creating efficiencies for their advisers in managing portfolios (and changing platforms and asset managers, if required), and charging a new fee for a service they've historically given away for free."

The six pieces were technology, platform proposition, adviser efficiency, remuneration, asset manager disclosure, and regulatory certainty.

While early iterations of managed accounts only offered Australian equities, which had little benefit other than tax efficiency, they now had a full range of investment and product structures such as global equities, managed funds and term deposits, while technology also allowed intra-day trading rather than just a single trade per day.

Platforms now allowed advisers and dealer groups manage portfolios rather than just administer client investments.

An efficiently structured managed account could also aid in adviser efficiency in terms of portfolio management, rebalancing and switching investments for advisers who have hitherto been largely focused on compliance rather than ensuring end-to-end process efficiency.

Hutchison also said the Australian Securities and Investments Commission's (ASIC's) Regulatory Guide 179 completed the puzzle by specifying different licensing requirements for all different managed account structures.

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